GIFT   OF 
THE     AUTHOR 


i 


Okaft  attit  (grab 
A 


PRESS  OF  THE  INDUSTRIAL  PRINTING  COMPANY 
SAN  JOSE,  CALIFORNIA 


N  3.4-1 


FOREWORD 

A  recent  judgment  by  the  Federal  Court  compelling 
the  restoration  of  2,300,000  acres  of  agricultural  lands 
unlawfully  claimed  and  withheld  from  the  people,  to- 
gether with  an  undecided  suit  now  pending  for  $300,- 
000,000  of  oil  lands  held  in  violation  of  law,  has  sug- 
gested the  necessity  of  furnishing  to  the  public  such 
facts  as  will  enable  the  intelligent  public  to  more  heartily 
co-operate  with  the  Government  in  its  struggle  with  this 
gigantic  conspiracy  to  defraud  and  degrade  the  indus- 
trial and  wealth  producing  classes  of  this  Republic; 
hence  the  settled  conviction  that  publicity  is  the  most  ef- 
fective weapon  which  can  be  employed  against  an  es- 
tablished and  organized  public  wrong  prompts  the  sub- 
mission of  the  following  statement  of  facts  which  are  of 
vital  importance  to  the  industrial  and  producing  classes, 
facts  which  either  have  been  forgotten  or  are  being  con- 
cealed and  suppressed  by  the  subsidized  press  of  the 
present  day. 

The  facts  submitted  will  disclose  not  only  the  un- 
lawful acquisition  of  the  public  lands,  but  will  reveal 
the  methods  by  which  the  savings  of  the  people  are  pass- 
ing out  of  their  possession  into  the  control  of  the  so- 
called  capitalists,  which  evidences  an  organized  con- 
spiracy of  those  controlling  the  finances  of  the  country 
to  also  control  the  proceeds  of  those  who  produce  the 
wealth. 

The  persistent  efforts  of  the  railroad  at  the  present 
time  in  demanding  further  investments  from  "the  man 
with  savings"  and  the  demand  for  increased  rates  for 
transportation  upon  its  inflated  valuations  with  a  de- 
crease in  its  rate  for  taxation  and  a  curtailing  of  its  lia- 
bility to  the  public,  invites  an  interested  public  to  inves- 

331847 


tigate  both  the  methods  and  the  means  by  which  it  has 
secured  its  assumed  holdings  as  well  as  its  domination 
over  the  government  which  it  has  so  violently  assailed 
for  not  complying  with  its  demands.  In  this  issue 
which  is  now  forced  upon  the  public  by  the  corporations 
against  the  people  the  suppression  of  facts  is  their  strong 
defense,  while  publicity  is  the  hope  of  the  people. 

Since  the  investigations  of  the  Government  officials 
alone  these  lines  have  in  the  past  demonstrated  the  fu- 
tility of  pursuing  this  elusive  corporation  along  the  tor- 
tuous trails  blazed  by  its  expert  bookkeepers,  which  too 
often  ended  in  a  jungle  of  destroyed  or  mutilated  rec- 
ords— a  practical  burning  of  the  bridges  behind  a  routed 
army — to  avoid  such  experiences  these  statements  will 
record  the  simple  facts  as  obtained  from  the  records  of 
this  company's  administration,  and  with  these  suppressed 
facts  the  public  may  determine  for  itself  regarding  its 
rights  and  interests,  leaving  the  burden  of  proving  right 
doing  and  honest  administration  upon  this  corporation 
which  has  all  the  evidences  under  its  control  (if  not 
destroyed  by  themselves)  which  would  exhonorate  itself 
and  restore  confidence  to  the  patronizing  public,  if  de- 
serving it. 

This  is  a  matter  of  vital  importance  to  every  patron 
of  transportation,  to  every  taxpayer,  and  to  every  person 
who  travels  or  ships'  over  the  lines  of  this  public  utility ; 
and  to  all  who  are  interested  in  the  suppression  of  a  gi- 
gantic conspiracy  to  defraud  the  Government  and  de- 
bauch the  public,  to  all  who  desire  and  demand  the 
faithful  administration  of  the  law. 

To  (the  interest  of  those  classes,  these  pages  are  re- 
spectfully dedicated,  with  the  reiterated  statement  that 
publicity  of  the  facts  is  the  most  effective  agency  for  op- 
posing the  perpetuation  of  a  public  wrong. 

C.  D.  HARVEY. 


A— PUBLIC  UTILITIES 

IN  THE  GRASP  OF  THE  SOUTHERN  PACIFIC 

COMPANY 

A  Public  Utility  is  a  public  service  corporation 
organized  for  the  benefit  of  Community  Interest 
instead  of  Individual  Interests. 

The  Community  Interest  is  paramount  to 
the  interest  of  the  individual  in  a  Public  Utility 
Corporation,  and  this  is  the  distinguishing  feat- 
ure between  a  Public  Utility  and  a  Private  Cor- 
poration. 

Public  Service  is  the  motive  as  well  as  the  jus- 
tification for  using  public  lands  and  Government 
subsidies  in  aid  of  its  construction,  which  could 
not  be  granted  to  aid  private  enterprise.  They 
may,  however,  be  rightfully  bestowed,  where  the 
public  is  the  beneficiary;  hence  where  public  en- 
terprises are  created  by  the  aid  of  Government 
subsidies,  the  public  has  a  vested  right  therein 
which  the  incorporators  must  respect  in  the  ad- 
ministration of  their  affairs.  It  is  a  public  trust, 
not  a  private  individual  matter;  the  property  is 
quasi-public  property,  and  its  officials  are  acting 


as  quasi-public  officers  in  the  administration  of 
the  same ;  and  any  diversion  of  its  use  from  com- 
munity interests  to  personal  gain — especially 
when  personal  gains  are  acquired  at  the  expense 
of  the  public — should  be  regarded  as  a  crime 
more  flagrant  than  that  of  the  highwayman. 

Disloyalty  to  a  public  trust  by  one  entrusted 
to  administer  the  same,  is  akin  to  treason,  and 
might  well  be  classed  as  Petit  Treason. 

Under  the  garb  of  a  public  utility  the  most  co- 
lossal frauds  have  been  practised,  and  some  of 
the  most  atrocious  crimes  committed  against  en- 
tire communities — communities  for  whose  ben- 
efit these  same  public  utilities  were  created — in 
which  graft  and  grab  have  run  riot  under  the 
cloak  of  public  utility. 

Up  to  1912  over  two  hundred  and  eighty-eight 
million  acres  of  public  lands  had  been  granted 
to  alleged  public  utilities,  amounting  to  over  six- 
ty per  cent  of  all  the  cultivated  lands  in  the  Unit- 
ed States  at  that  date. 

A  practical  illustration  of  the  methods  em- 
ployed and  the  effect  upon  the  communities 
where  these  alleged  public  utilties  operated,  may 
be  found  in  the  history  of  one  of  the  most  con- 
spicuous of  our  so-called  public  utilities;  its  "in- 
sidious influence"  both  at  the  Capitol,  where 


these  public  utilities  are  created  and  subsidized, 
and  in  the  community  wherein  these  utilities  are 
operated. 

By  an  Act  of  Congress  passed  and  approved 
July'l,  1862,  aid  was  given  for  the  construction 
of  a  railroad  and  telegraph  line  from  the  Mis- 
souri River  to  the  Pacific  Coast — a  trans-contin- 
ental line  projected  by  four  business  men  in  Sac- 
ramento, California. 

By  the  terms  of  this  grant  the  incorporators 
were  to  receive,  as  Government  aid,  thirty-two 
hundred  acres  of  land  per  mile,  together  with  a 
right  of  way  two  hundred  feet  in  width  across 
the  continent;  also  Government  bonds  to  the 
amount  of  sixteen  thousand  dollars  per  mile,  and 
in  the  mountainous  district  this  subsidy  was  in- 
creased to  thirty-two  thousand  dollars  for  one 
hundred  and  fifty  miles,  and  to  forty-eight  thous- 
and dollars  per  mile  for  another  one  hundred  and 
fifty  miles. 

In  addition  to  these  subsidies,  the  company 
was  authorized  to  issue  stock  to  the  amount  of 
one  hundred  million  dollars,  to  be  used  in  the 
construction  of  the  road.  In  addition  to  the  above 
the  company  was  authorized  to  take  the  timber, 
stone  and  building  material  from  the  adjoining 
land  for  the  construction  of  the  road. 


All  mineral  lands  were  exempted  from  passing 
under  this  grant,  and  all  lands  which  were  not 
sold  within  three  years  after  the  completion  of 
the  road  were  subject  to  pre-emption  and  settle- 
ment by  actual  settlers,  upon  payment  of  the  Gov- 
ernment price  of  $1.25  per  acre. 

The  Act  provided  that  the  railroad  company 
should  file  its  assent  to  the  conditions  of  the  Act, 
within  one  year  from  the  date  of  its  approval,  and 
to  build  forty  consecutive  miles  of  road  within 
two  years,  and  forty  miles  each  year  thereafter 
until  completed;  the  entire  Union  Pacific  line  to 
be  completed  by  July  1,  1874. 

These  Government  bonds  were  to  be  issued  to 
the  company  according  to  the  progress  in  the 
construction  of  the  road.  Whenever  forty  con- 
secutive miles  were  completed  and  equipped  the 
bonds  were  issued,  and  the  lands  were  patented 
to  the  company;  the  issuing  of  these  bonds  con- 
stituted, ipso  facto,  a  first  lien  on  the  whole  line 
of  the  road,  telegraph,  fixtures,  rolling  stock  and 
property  of  every  kind  and  description;  and  a 
failure  to  comply  with  all  the  conditions  of  the 
Act  incurred  a  forfeiture  of  all  the  company's 
property,  as  well  as  franchises,  and  provided  that 
the  Government  should  take  possession  of  the 
road  and  all  the  property  of  the  company. 

Another  provision  of  said  Act  required  the 


5 

railroad  company,  on  the  completion  of  the  road, 
to  set  aside  five  per  cent  of  the  gross  earnings,  to 
be  applied  in  payment  of  the  interest  on  the  Gov- 
ernment bonds  given  in  aid  of  the  construction 
of  the  road,  and  the  excess,  if  any,  to  be  applied 
in  liquidation  of  said  bonds.  This  interest  ac- 
count alone  amounted  to  over  $3,000,000  a  year, 
which  was  being  paid  by  the  Government. 

It  was  further  provided  that  upon  the  filing  of 
the  map  designating  the  location  of  the  road,  all 
lands  within  the  limits  of  this  grant,  for  ten  miles 
either  side  of  the  railroad,  were  to  be  withdrawn 
from  pre-emption  or  homestead  or  settlement  un- 
til the  selections  were  made  by  the  railroad  com- 
pany. The  company  having  by  this  provision 
secured  the  exclusive  control  of  these  lands  for 
purposes  of  settlement,  until  such  time  as  they 
made  their  selections,  by  delaying  to  make  such 
selections,  these  lands  were  held  from  taxation 
for  years. 

Although  this  Act  was  approved  by  Congress 
July  1,  1862,  nothing  was  done  under  its  provis- 
ion toward  the  construction  of  the  road,  so  far 
as  the  records  show.  Their  construction  work 
was  directed  more  to  the  Congressional  work  of 
the  next  Congress  than  to  the  building  of  the 
road  under  the  Act  of  1862. 


At  the  next  Congress  of  1864, — over  a  year 
after  the  time  limited  for  the  company  to  file  its 
assent  to  the  provisions  of  the  Act  of  1862, — the 
activities  of  these  incorporators  at  Washington 
indicated  that  more  energy  and  effort  were  being 
spent  for  controlling  Congress  than  for  con- 
structing the  Pacific  railroad,  as  the  following 
amendments  to  the  original  Act  of  1862  would 
indicate. 

First  Amendment 

To  extend  the  time  for  filing  their  assent  and 
map  locating  the  route  of  the  road. 

Second  Amendment 

Increasing  the  land  grant  from  3,200  acres  to 
6,400  acres  per  mile. 

Third  Amendment 

Extending  the  area  from  which  the  railroad 
company  could  make  its  selection  of  land,  from 
thirty  to  sixty  miles  in  width  along  the  road  as 
located  by  the  map  (to  be  filed  thereafter). 

Fourth  Amendment 

The  bond  issue  of  sixteen  thousand  dollars  per 
mile  was  increased  to  thirty-two  thousand  dol- 


lars  per  mile  by  authorizing  the  company  to  is- 
sue bonds  equal  in  amount  to  the  Government  is- 
sue, which  were  to  be  a  first  lien  upon  the  prop- 
erty of  the  company  in  the  place  of  the  first  Hen 
held  by  the  Government  under  the  Act  of  1862, 
thereby  making  the  Government  lien  second  to 
the  lien  of  the  company's  bonds — as  expressed  in 
the  Act  of  1862,  it  "shall  be  subordinate  to  that 
of  the  bonds  of  any  or  either  of  said  companies/' 

The  "insidious  influences"  complained  of  by 
the  present  Administration  evidently  had  a  firm 
grip  at  the  Capitol  as  early  as  1864,  and  the  pro- 
moters of  subsidized  schemes  were  at  that  date 
past  masters  in  the  art  of  manipulating  legisla- 
tion favoring  private  interests,  and  one  may 
reasonably  ask,  in  view  of  such  a  record,  for 
whom  do  our  legislators  legislate,  the  people  or 
private  interests? 

Fifth  Amendment 

In  addition  to  increasing  the  issue  of  bonds 
from  $16,000  to  $32,000  per  mile,  they  were  to 
be  issued  to  the  company  on  the  completion  of 
twenty  miles,  instead  of  forty  miles,  as  provided 
under  the  Act  of  1862,  and  in  the  mountainous 
district  where  thirty-two  and  forty-eight  thou- 
sand dollars  per  mile  were  to  be  released  upon 
the  construction  and  equipment  of  twenty-five 


8 

miles  of  road,  the  release  of  two-thirds  of  the 
bonds — up  to  the  cost  of  construction — was  to  be 
made  to  the  railroad  company  upon  a  filing  of  a 
certificate  by  the  chief  engineer  of  the  railroad 
company,  that  a  specific  number  of  miles  was 
ready  for  the  superstructure.  This  Amendment 
practically  places  the  issuing  of  these  bonds  with 
the  railroad  company  and  its  employees. 

Sixth  Amendment 

Called  for  a  reduction  of  the  number  ot  miks 
of  road  to  be  constructed  in  order  to  hold  the 
franchise;  on  the  Central  Pacific  it  was  reduced 
from  forty  to  twenty-five  miles  per  annum,  and 
every  amendment  to  the  original  Act  of  1862,  in 
like  manner  was  made  to  favor  the  railroad  com- 
pany. 

Seventh  Amendment 

Under  the  Act  of  1862  all  compensation  for 
services  due  from  the  United  States,  together 
with  the  five  per  cent  on  the  gross  earnings  of  the 
road,  were  to  be  applied  in  payment  of  the  inter- 
est on  these  Government  bonds,  as  well  as  on  the 
principal;  this  was  changed,  reducing  the  pay- 
ment to  one-half  the  amount  due  for  Government 
service  rendered  by  the  railroad  company. 


The  above  with  other  changes  made  by  the 
Congress  of  1864  left  very  little  of  the  original 
Act  relating  to  the  construction  and  financial  aid 
in  its  original  form.    It  practically  created  a  new 
franchise  with  new  conditions  increasing  the  sub- 
sidies in  lands  and  bonds  100  per  cent  and  de- 
creasing the  obligations  of  the  incorporators  in 
the  same  proportion,  and  since  all  this  was  ac- 
quired at  the  expense  of  the  public,  it  might  in- 
dicate that  expert  and  unscrupulous  politicians 
and    financiers    dominated    legislation    at    the 
national  Capitol  at  this  period,  and  these  indica- 
tions crystalize  into  conviction  when,  in  addition 
to  the  increase  of  lands  and  bonds  100  per  cent, 
the  railroad  company  is  authorized  to  issue  addi- 
tional bonds,  equal  in  amount  to  the  Government 
bonds  subordinate  to  the  bonds  to  be  issued  by  the 
company   which   had  already   secured   subsidies 
more  than  sufficient  to  construct  the  road,  as  a 
sequence  of  this  transaction  the  Government  was 
compelled  to  pay  upon  these  bonds  issued  to  the 
railroad  company  in  interest  and  principal  over 
$188,000,000,  by  reason  of  the  company  refusing 
and  failing  to  make  payment  according  to  the  con- 
ditions contained  in  the  Act  under  which  they  re- 
ceived these  bonds.    By  this  failure  the  company 
forfeited  its  franchise  and  all  its  property  as  well, 
had  the  Government  exercised  its  rights. 


19 

Instead  of  enforcing  a  merited  forfeiture  of 
the  franchise  on  account  of  the  two  years  delay 
in  the  construction  of  the  road,  a  reward  was  giv- 
en by  doubling  the  grant  as  well  as  the  bond  is- 
sue, and  made  the  lien  of  the  Government  sub- 
ordinate to  the  lien  of  the  incorporators,  at  the 
same  time  curtailing  the  obligations  of  the  pro- 
moters and  lessening  their  responsibility  in  the 
same  proportion. 

CONSTRUCTION 

In  the  construction  of  the  road  a  new  phase  is 
presented  to  the  incorporators  and  builders  of  the 
road,  since  two  things  are  to  be  considered  in  its 
construction.  Two  opposing  forces  were  now 
working,  apparently  in  unison,  but,  in  fact,  dia- 
metrically opposed  to  each  other — a  sort  of  Dr. 
Jekyll  and  Mr.  Hyde  combination.  In  the  work- 
ing out  of  this  combination,  the  respectable  Dr. 
Jekyll,  as  a  quasi-public  official  of  a  subsidized 
public  utility,  contracts  with  himself,  as  an  offic- 
ial, and  owner  of  stock  in  an  improvement  com- 
pany, for  the  labor  and  supplies  necessary  for  the 
construction  and  equipment  of  the  public  utility, 
in  which  he  is  a  quasi-public  official  to  protect 
the  interests  of  the  public. 

By  assuming  the  name  of  an  improvement 


11 

company  they  contract  with  themselves  for  all 
supplies  and  materials,  all  labor  and  equipments 
for  the  construction  and  completion  of  this  pub- 
lic utility,  at  whatever  prices  or  profits  they  may 
determine,  without  any  intermeddling  by  com- 
petitive bidders. 

Having  created  such  conditions,  one  of  the  two 
interests  must  suffer,  since  it  is  impossible  to  give 
one's  best  service  to  two  such  masters  or  causes 
at  the  same  time  without  doing  an  injustice  to 
one  or  the  other,  and  whatever  advantage  may  be 
acquired  by  either  is  attended  by  a  corresponding 
disadvantage  to  the  other,  and  a  violation  of  a 
trust. 

In  the  present  case  a  transcontinental  railroad, 
with  certain  specified  branches  and  aided  in  its 
construction  by  Government  subsidies,  was  to  be 
built  by  these  incorporators.  The  Government 
aids  amounted  approximately  to  the  sum  of 
$308,358,355,  to  which  was  subsequently  added 
the  sum  of  $188,000,000,  making  a  total  of  $496,- 
358,355  for  the  construction  of  a  public  utility 
which  according  to  the  report  of  a  Congression- 
al Committee,  should  have  been  constructed  for 
$95,955,347.  This  was  the  problem  to  be  solved 
by  these  incorporators,  these  contractors,  these 
quasi-public  officials,  these  owners  and  officials 


12 

of  intangible  improvement  companies,  all  com- 
bined in  ONE  GIGANTIC  PLOT  to  beat  the  Govern- 
ment and  plunder  the  public. 

This  subsequent  advancement  of  $188,000,000 
by  the  Government  to  pay  the  defaulted  interest 
v:as  necessitated  by  the  subordination  of  the 
Government  lien  to  fte  lien  of  ^the  company's 
bonds  subsequently  issued.  By  this  substitution 
it  h^came  necessary  for  the  Government  to  pay 
the  defaulted  interest  upon  the  bonds  of  the 
company  in  order  to  protect  its  interests  from 
fore-Insure,  which  would  follow  the  non-pay- 
ment of  interest  on  either  the  Government  or 
company's  bonds. 

These  non-competitive  contracts  w-hlth  were 
made  by  themselves,  with  themselves,  for  the 
construction  and  equipment  of  the  road,  and  for 
all  supplies  while  operating  the  same,  were  a 
conspicuous  feature  in  the  solving  of  this  prob- 
lem most  embarrassing  for  a  conscientious  bus- 
iness man. 

PUBLIC  UTILITY  OR  PUBLIC  UTILIZED — WHICH ? 
The  construction  of  the  road  having  been  com- 
pleted, a  new  chapter  is  opened  in  the  operation 
of  this  public  utility  in  which  the  same  policy  of 
greed  and  graft  is  manifested.  We  now  have 


13 

for  review  a  public  utility  which  by  the  adoption 
of  honest  methods — according  to  the  Report  of 
a   Congressional    Committee — could   have   been 
built   for   $95,955,347,    for   which   the   Govern- 
ment extend  its  aid  to  the  amount  of  $496,358,- 
355. 

These  amounts  represent  the  comparative  in- 
terests of  the  public  in  this  public  utility  in  1878, 
and  should  have  stamped  the  public  utility  char- 
acteristic upon  both  the  railroad  and  its  services 
to  the  public. 

Under  the  policy  adopted  by  the  officials  con- 
trolling this  intended  public  utility,  it  has  been 
made  the  most  effective  organization  for  creat- 
ing monopolies  and  trusts,  for  gathering  colossal 
and  unearned  fortunes,  for  controlling  the  indus- 
trial classes  and  the  profits  of  the  producing 
classes,  for  changing  a  government  of  the  people 
into  an  oligarchy  where  the  multimillionaires 
buy  and  sell  legislation  as  merchandise;  it  has 
destroved  the  freedom  of  the  industries,  and  sub- 
jected the  producing  classes  to  the  domination  of 
a  money  aristocracy. 

In  the  control  of  these  public  utilities  the  same 
policy  of  greed,  graft  and  grab  which  was  man- 
ifested In  the  manipulation  of  Congress  and  the 
construction  of  the  road,  was  equally  apparent  in 


14 

the  operating  of  this  public  utility.  Its  charges 
for  services  were  exorbitant;  its  rates  on  the 
basis  of  "all  the  traffic  will  bear" ;  its  rules  were 
arbitrary  and  its  courtesy  to  the  public  was  lack- 
ing; every  device  for  extorting  money  from  the 
patronizing  public  was  employed,  from  the  high- 
est official  to  the  baggage  man  demanding  an 
extra  dollar  for  roping  the  trunk  which  was 
passed  on  all  other  lines. 

A  comparison  of  the  rates  of  the  present  time 
with  the  rates  charged  before  competition  and 
Government  supervision,  will  demonstrate  the 
change  wrought  by  Government  control  and 
competition. 

In  1875  the  rate  for  a  lady  and  six-year-old 
son  with  an  ordinary  trunk  of  clothing  from  Chi- 
cago to  San  Francisco  was  as  follows : 

Ticket  for  adult _ $117.00 

Half  ticket  for  child  89.00 

Ordinary  trunk  of  clothing  20.00 

Roping  trunk  (already  equipped  with 

heavy   strap)    1.00 

Sleeping  car  section  .....     „ 20.00 

$247.00 


15 
Under  Government  Control  and  Competition 

Ticket  for  adult  $72.52 

Half  ticket  - 38.75 

Roping  trunk  with  heavy  straps 00.00 

Excess  baggage,  about 2.50 

Sleeping  car  section  7.50 

$125.25 

This  difference  as  expressed  by  these  rates,  in- 
dicates the  degree  of  improvement  realized,  both 
in  money  and  courtesy,  under  Government  con- 
trol and  competition,  against  which  railroad  of- 
ficials and  investors  in  railroad  securities  com- 
plain so  vigorously.  The  stockholding  class  in 
the  United  States  now  numbers  about  six  hun- 
dred and  twenty  thousand. 

REBATES  AND  THEIR  RESULTS 

The  system  of  rebates  as  adopted  by  these  of- 
ficials destroys  all  legitimate  competition  by  giv- 
ing to  a  favored  few  the  control  of  the  business 
affected  by  transportation;  by  this  system  of  re- 
bates or  special  rates  the  masses  of  the  producing 
classes  were  compelled  to  share  the  profits  of 
their  labor  with  a  non-producing  class  to  whom 
rebates  or  special  rates  were  granted.  In  this 


16 

manner  the  great  body  of  the  producing  class 
were  denied  the  equal  privilege  of  doing  their 
own  business  in  securing  a  livelihood. 

This  rebate  system  as  regulated  by  these  of- 
ficials was  a  cunning  scheme  for  accomplishing 
a  double  purpose — first,  to  secure  the  entire  pat- 
ronage of  its  subject;  second,  to  effect  the  abso- 
lute subjugation  of  its  patrons,  who  were  re- 
quired to  sign  an  "iron-clad  contract"  binding 
themselves  to  make  all  shipments  by  and  through 
this  company  alone;  this  contract  was  a  sugar- 
coated  bribe  to  a  shipper  to  sign  away  his  vested 
business  right  of  shipping  as  a  freeman,  there- 
by subjecting  himself  to  the  demands  of  this 
transportation  company  as  completely  as  the  serf 
of  the  feudal  days  when,  on  his  bended  knees,  un- 
girt,  uncovered,  and  holding  up  his  hands  to- 
gether between  those  of  his  feudal  lord  who  sat 
before  him,  did  then  and  there  profess  "that  he 
did  become  his  man  from  that  day  forth." 

Under  this  system  the  shipper  abandoned  all 
shipping  rights,  and  at  the  same  time  pledged 
his  moral  support  in  opposing  any  competition 
which  might  give  relief  to  a  struggling  class  of 
industrial  workers  from  the  extortionate  de- 
mands made  upon  them  by  this  company  to  whom 
they  are  pledged  and  bound. 


17 

By  such  methods,  not  only  individuals  in  their 
private  capacity  but  also  as  members  of  public 
associations  were  seduced  and  controlled.  Mem- 
bers of  boards  of  trade,  chambers  of  commerce 
and  various  public  associations  were  used  as 
pawns  to  create  favorable  public  sentiment  when- 
ever and  wherever  transportation  interests  of 
their  masters  were  threatened  by  legitimate  com- 
petition. The  numberless  petitions  sent  to  Con- 
gress from  these  bodies,  demanding  free  passage 
through  the  Panama  Canal  for  the  Pacific  Mail 
Steamship  Company's  vessels,  was  an  echo  from 
the  Southern  Pacific  Company. 

HISTORY  OF  THE  PACIFIC  MAIL  STEAMSHIP 
COMPANY 

The  Pacific  Coast  trade  was  absolutely  dom- 
inated by  the  Southern -Pacific  Company,  under 
the  alias  of  the  Pacific  Mail  Steamship  Company, 
and  for  years  exacted  a  tribute  of  $75,000  a  month 
from  the  connecting  Eastern  railroad  lines  which 
were  interested  in  the  transportation  of  its  trans- 
continental freight.  The  purpose  of  this  steam- 
ship line  in  running  its  boats  at  an  actual  loss 
during  this  period  was  to  control  and  destroy 
water  competition  in  order  to  maintain  the  ex- 
tortionate transcontinental  rates  charged  by  the 


18 

railroad;  water  rates   were  about  one-half  the 
rates  charged  by  the  railroad  company. 

Among  the  contributors  to  this  fund,  for  re- 
funding the  company  for  the  loss  incurred  in 
maintaining  the  service  of  the  Pacific  Mail 
Steamship  Company,  $4,000,000  was  given  by 
the  officials  of  that  road  and  paid  from  the  earn- 
ings of  the  Union  Pacific,  to  themselves  as  own- 
ers and  officials  of  the  Pacific  Mail  Steamship 
Company,  in  its  efforts  to  maintain  its  extortion- 
ate rates  over  this  public  utility  railroad,  of 
which  the  Union  Pacific  constituted  an  import- 
ant part. 

A  COMPETITOR  IN  WATER  TRANSPORTATION 

The  expansion  of  the  Pacific  Coast  trade  later 
brought  to  this  coast  an  Eastern  firm  of  capital- 
ists with  sufficient  capital  to  establish  a  rival  line 
from  New  York  to  San  Francisco,  by  using  the 
Government  railroad  across  the  Isthmus  of  Pan- 
ama, thereby  establishing  a  water  transporta- 
tion line  between  the  coast  cities  of  the  Atlantic 
and  the  Pacific.  As  this  enterprise  was  being 
completed,  the  officials  of  the  competing  line 
were  notified  that  the  Government  railroad  re- 
fused to  receive  the  freight  of  the  competing  line 
for  transportation  across  the  Isthmus,  alleging 


19 

as  a  reason  for  its  refusal  that  the  Pacific  Mail 
Steamship  Company  had  previously  contracted 
with  the  Government  officials  for  the  transporta- 
tion of  its  freight;  therefore  this  Government 
railroad  would  be  unable  to  handle  the  freight  of 
the  competing  line. 

In  view  of  the  fact  that  this  branch  of  the  Pa- 
cific Mail  Steamship  line  was  running  its  boats 
between  New  York  and  New  Orleans  as  a  part 
of  the  Southern  Pacific's  transcontinental  Sun- 
set Route  between  San  Francisco  and  New  York, 
this  closing  of  the  Government  railroad  to  this 
competing  line  of  transportation  indicates  that 
strong  "insidious  influences"  were  at  that  time 
prevailing  at  the  seat  of  government. 

Thwarted  in  their  effort  to  establish  a  through 
line  of  transportation  by  the  use  of  the  Govern- 
ment railroad  across  the  Isthmus,  in  connection 
with  their  steamships,  the  New  York  capitalists 
arranged  with  the  Mexican  government  to  con- 
struct the  Tehauntepec  railroad  across  Mexican 
territory  to  carry  their  freight  from  ocean  to 
ocean ;  hence  to  Eastern  capital  and  the  Mexican 
government  is  due  the  credit  of  establishing  wat- 
er competition  between  the  Pacific  Coast  and  the 
East,  which  the  Southern  Pacific  Company  had 
obstructed  for  so  many  years,  while  controlling 


20 

and  receiving  the  revenues  of  this  public  utility 
which  was  built  with  the  money  of  the  public. 

In  reviewing  the  history  of  the  Pacific  Mail 
Steamship  Company  and  the  selfish  service  it 
rendered  the  Pacific  Coast,  it  is  amazing  to  ob- 
serve the  blind  devotion  of  these  rebate  takers, 
merchants,  shippers  and  various  trade  organiza- 
tions, to  the  call  of  the  Southern  Pacific  Com- 
pany when  its  interests  are  threatened.  This  was 
evidenced  by  the  numberless  petitions  Sent  to 
Congress  by  the  various  boards  of  trade,  cham- 
bers of  commerce,  merchants'  exchange  and 
shipping  associations,  demanding  of  the  Gov- 
ernment a  free  passage  through  the  Panama  Ca- 
nal— the  people's  highway  from  ocean  to  ocean— 
of  those  very  vessels  which  for  years  were  em- 
ployed to  crush  out  legitimate  competition  so  as 
to  burden  the  public  with  extortionate  railroad 
rates;  to  give  to  these  vessels  a  free  passage 
through  this  territory  which  in  the  past  they  have 
so  effectively  closed  to  all  competing  lines;  free 
passage  to  this  exploiting,  subsidized  company 
in  order  to  compete  with  unsubsidized  foreign 
vessels  whose  service  is  beneficial  to  the  general 
public. 

To  crush  out  competition  by  the  aid  OA  unequal 
privileges  has  ever  been  the  policy  of  this  com- 


21 

pany,  and  th~/  «re  still  mustering  all  the  agen- 
cies they  can  control  to  accomplish  this  at  the 
oresent  time. 

It  should  be  a  humiliation  to  our  civic  pride  to 
>erve  how  commercial  bodies  and  prominent 
Business  men  are  ready  to  give  such  blind  de- 
votion and  obedience  to  such  a  cause;  it  is  an 
alarming  symptom  of  degeneracy  and  disloyalty 
both  to  the  Government  and  to  humanity.  "It  is 
..  tying  too  dear  a  price  for  our  (Southern  Pa- 
mc,  public  utility)  whistle."  It  is  an  occasion 
ror  congratulation  to  both  the  shippers  and  pro- 
ducers of  the  Pacific  Coast,  that  the  grip  of  this 
Governnment-aided  monopoly  upon  the  Panama 
Railroad,  in  aid  of  its  extortionate  rates,  has 
mailed  to  control  the  Panama  Canal  under  the 
present  Administration. 

Aspersion,  obstruction  and  litigation  were  the 
greetings  extended  to  every  transcontinental  line 
promised  relief  from  these  exactions:  ter- 
sites  were  preoccupied,  water  fronts  were 
obbled,  mountain  passes  blockaded,  and  every 
neans  known  to  law,  bribery  or  trickery  was  em- 
ioyed  to  crush  out  legitimate  competition,  until 
me  patience  of  the  people  was  exhausted  and  the 
Government  was  compelled  to  exercise  its  super- 
vising control  for  the  protection  and  preservation 


22 

of  the  rights  of  the  people.  This  struggle  is  still 
on;  the  activities  of  the  Southern  Pacific  Com- 
pany are  being  conducted  on  the  same  old  lines 
for  perpetuating  its  power  through  the  Panama 
Canal  in  the  future  as  it  dominated  the  govern- 
ment railroad  in  the  past,  in  order  to  maintain  its 
grip  upon  the  industries  and  the  industrial 
workers  of  the  Coast;  its  policy  of  greed,  graft 
and  grab  is  unchanged. 

INVESTMENTS 

In  reply  to  the  unjust  charges  recently  pub- 
lished against  "the  man  with  savings,"  for  his 
unwillingness  to  further  invest  his  savings  in  the 
stocks  and  bonds  of  public  utilities,  the  record  of 
the  investments  heretofore  made,  and  the  results 
therefrom,  furnish  good  reason  for  this  unwill- 
ingness, as  the  public  can  judge. 

In  1862  Congress  passed  an  Act  granting 
about  $200,000,000  dollars  in  aid  of  the  con- 
struction of  this  transcontinental  railroad  from 
the  Missouri  River  to  the  Pacific  Coast,  which, 
under  the  honest  methods  (according  to  a  report 
of  a  Congressional  Committee)  could  have  been 
built  for  less  than  one-half  the  amount  appro- 
priated. By  the  provisions  of  this  Act  an  accep- 
tance of  its  terms  was  to  be  filed  within  one  year, 


23 

and  not  less  than  forty  miles  of  road  be  completed 
within  two  years,  and  forty  miles  each  succeed- 
ing year  thereafter,  until  the  completion  of  the 
road. 

Two  years  later,  in  1864,  the  incorporators 
having  failed  to  file  its  acceptance,  or  to  perform 
any  of  the  requirements  of  said  Act,  applied  for 
and  obtained  from  the  Congress  of  1864  addi- 
tional appropriations  substituting  the  lien  of  the 
bonds  to  be  issued  by  the  railroad  company, 
for  the  lien  of  the  Government  bonds  author- 
ized by  the  Act  of  1862;  it  also  limited  the 
obligations  and  liabilities  of  the  company  as  spec- 
ified in  the  Act  of  1862.  The  total  amount  of  the 
subsidies  granted  under  the  Acts  of  1862  and 
1864  aggregated  $322,338,295  as  working  cap- 
ital, which,  after  the  construction  of  this  $95,- 
955,347  public  utility,  should — "under  honest 
methods" — have  left  a  balance  in  the  hands  of 
the  company  of  $226,882,921. 

From  the  completion  of  the  road  up  to  1887 
the  earnings  of  the  road  amounted  to  the  sum  of 
$611,479,443.90,  which  amount,  after  paying  op- 
erating expenses,  taxes,  rentals  etc.,  netted  the 
company  the  sum  of  $278,023,357.63.  In  addi- 
tion to  this  should  be  included  the  sum  of  $25,- 
000,000  of  unreported  earnings  which  was  set 


24 

aside  as  a  special  fund  for  pools,  rebates,  subsi- 
dies and  the  like. 

Up  to  this  time,  the  Government  was  unable  to 
collect  the  five  per  cent  on  the  gross  earnings  in 
payment  of  the  interest  on  the  bonds  given  in  aid 
of  the  construction  of  the  road,  and  in  order  to 
protect  its  interests  from  foreclosure  the  Gov- 
ernment was  compelled  to  advance  $188,000,000 
in  payment  of  the  interest  defaulted  on  these 
bonds  by  the  company.  The  total  amount  re- 
ported as  paid  by  the  company  during  eighteen 
years  of  accumulation  was  only  $30,955,039.61. 

In  1878  Congress  appointed  a  Committee  to 
investigate  the  affairs  of  the  Pacific  Railroads 
and  directed  the  Attorney  General  to  institute 
proceedings  to  compel  the  company  to  a  perform- 
ance of 'the  conditions  of  the  Act  granting  the 
subsidies  and  franchise;  nothing  resulted  from 
this  action  as  shown  by  the  records  of  the  Gov- 
ernment. 

Again,  in  1887  another  Committee  was  ap- 
pointed and  another  order  was  passed  again  di- 
recting the  Attorney  General  to  institute  pro- 
ceedings to  enforce  a  compliance  with  the  pro- 
visions of  said  Act. 

At  this  time  the  railroad  company  held  control 


25 
of  the  various  funds  as  follows : 

Unexpended  Government  aids $226,382,921 

Net  income  from  earnings  of 

the  road  $278,023,357.63 

Earnings  not  reported  to  Gov't  25,866,235.72 
Advancements  on  defaulted 

interest    188,600,000.00 


Total  $718,272,514 

Credit  this  amount  by  18  years 

accumulation   $  30,955,039.61 


Total  amount  in  hands  of 

company  1887  $687,317,475 

From  1887  until  1899  the  railroad  company 
continued  to  hold  its  grip  upon  the  road,  the  rev- 
enues and  the  regions  through  which  it  operated, 
when  Congress  made  its  final  attempt  in  1899  to 
enforce  a  settlement,  since  some  of  the  bonds  had 
become  due  and  others  were  about  to  fall  due. 
Another  Committee  was  appointed  with  power  to 
settle  with  the  railroad  company. 

Eleven  and  one-half  years  had  now  elapsed 
since  the  last  Committee  had  made  its  report, 
during  which  time  the  railroad  company  had  re- 
ceived about  $175,000,000  gross  income  from  the 


26 

road,  the  net  earnings  from  which  increased  this 
balance  of   1887  to  approximately  the  sum  of 

$751,521,275.35. 

In  February,  1899,  an  agreement  was  entered 
into  between  this  last  named  committee  and  the 
railroad  company  for  settlement  of  the  Govern- 
ment claims.  In  this  settlement  the  Government 
was  required  to  take  the  promissory  notes  of  the 
railroad  company,  in  lieu  of  moneys  they  had  re- 
ceived and  retained  from  the  earnings  of  the 
road;  the  payments  were  to  be  made  in  install- 
ments extending  over  a  period  of  ten  years  with 
interest  at  the  rate  of  three  per  cent  per  annum, 
where  the  Government  had  for  nearly  thirty 
years  paid  six  per  cent  for  the  company  when  it 
defaulted  its  payments. 

This  settlement  was  influenced  largely  by  the 
unfavorable  conditions  which  were  created  prior 
to  this  settlement. 

CONDITIONS  AFFECTING  THIS  SETTLEMENT 

In  justice  to  those  representatives  of  the  Gov- 
ernment in  this  transaction  no  reflection  upon 
their  ability  or  loyalty  to  the  Government  is  im- 
puted, since  conditions  created  before  their  ap- 
poitment  necessarily  influenced  their  action. 


27 

During  the  period  these  promoters  were  operat- 
ing this  transcontinental  line  and  receiving  its 
revenues  they  were  also  actively  engaged  in  se- 
curing other  subsidies  for  the  building  of  other 
roads  which  would  give  them  another  line  of 
transportation  from  the  Pacific  to  the  Atlantic 
Coast.  From  Portland,  via.  San  Francisco  and 
New  Orleans,  to  New  York,  with  hundreds  of 
miles  of  branch  roads  extending  from  the  main 
line  as  feeders,  thereby  holding  the  Pacific 
Coast  and  all  its  industries  jn  its  Strangling 
grasp ;  meanwhile  the  old  road  and  its  equipments 
were  allowed  to  deteriorate  to  such  an  extent 
as  to  necessitate  the  expenditure  of  large  sums 
of  money  to  successfully  compete  with  this  new 
trans-continental  line  now  equipped  and  owned 
by  themselves,  as  a  competing  line  in  the  event  of 
the  Government  taking  over  the  old  line  in  set- 
tlement of  its  claim  upon  the  road;  the  motive 
for  the  building  of  this  competing  line  is  indicat- 
ed in  an  an  uncontradicted  public  statement,  at- 
tributed tq  one  of  the  principals  in  this  group  of 
four,  "That  the  Government  would  get  little  ex- 
cept two  streaks  of  rust,  running  across  the  con- 
tinent, in  case  it  should  take  the  road  away  from 
them."  They  now  owned  a  competing  line  by 
rail  to  New  Orleans  and  a  steamer  line  from  that 
point  to  New  York,  hence  they  could  ship  on  their 


28 

own  lines  through  ,to  the  Atlantic  Coast  and 
Eastern  cities.  This  statement  indicates  both 
the  condition  of  the  road  as  well  as  the  adverse 
conditions  under  which  the  representatives  of 
the  Government  labored  at  the  time  of  this  se*- 
tlement. 

CAPITALIZATION 

A  summary  of  the  cost  and  capitalization  «"• 
this  transcontinental  road  discloses  another  in- 
portant  source  of  income  which  is  not  enumera? 
ed  in  the  above  mentioned. amounts,  and  whicfe 
is  also  controlled  by  the  maniuplators  of  this  pub- 
lic utility. 

By  this  issue  and  sale  of  the  stocks  and  bonds 
of  this  railroad  the  sum  of  approximately  $981 
571,915  of  the  people's  savings  has  passed  from 
the  hands  of  the  people  into  the  control  of  these 
railroad  officials;  it  was  an  exchange  of  $981,- 
571,915  of  the  savings  of  the  people  for  stockc 
and  bonds  of .  a  railroad  which,  under  honest 
methods,  could  have  been  constructed  for  one- 
eighth  that  amount  paid  by  the  public  for  thes* 
ficticious  securities. 

A  brief  review  of  the  issuing  of  these  stoclc 
and  bonds  by  these  officials  will  illustrate  both 
the  methods  employed,  and  the  amount  secured 
under  this  system. 


29 

Stock  issued  in  its  construction $112.626,200 

Stock  issued  since  1911 293,888,400 

Bonds  issued  in  construction 143,748,572 

issued  since  its  construc- 
tion  .  .  245,676,155 


Total  issue  of  bonds  and  stock $682,811,289 

The  actual  cost  of  construction  as 
reported  by  the  Congression- 
al Committee  of  1887 $  95,955,347 

The  amount  of  bonds  and  stock  issued  in  its 
construction  was  $256,366,732.  A  summary  of 
these  amounts  which  have  passed  inito  the  con- 
trol of  the  officials  of  this  public  utility  after  pay- 
ing for  the  construction  of  the  road,  all  operating 
expenses,  taxes,  rebates  and  rentals,  would  show 
approximately  the  following: 

Unused  Government  aids $  226,382,921 

Net  income  from  roads 425,971,236 

Income  not  reported  to  Gov- 

ment  25,866,235 

Interest  paid  in  defaulted  bonds  188,000,000 
Stock  and  bonds  issued  since 

completion   539,560,455 


Grand  total  1,405,780,847 


30 

This  amount  has  apparently  passed  out  from 
the  public  through  this  public  utility,  into  the  con- 
trol of  the  officials  of  this  railroad  company,  who 
are  still  complaining  that  "the  man  with  savings 
is  willing  to  invest  in  almost  anything  else  than 
in  public  utilities,  and  who  are  still  demanding 
increased  rates  and  reduced  taxes  to  save  them 
from  bankruptcy  and  ruin. 

This  increase  in  stocks  and  bonds  represents 
the  ficticious  capital  which  these  railroad  offi- 
cials have  secured  by  this  exchange  for  the  sav- 
ings of  the  people.  In  this  transaction  a  grie- 
vous wrong  has  been  perpetuated  upon  both  the 
non-investing  as  well  as  the  investing  public, 
since  all  who  are  compelled  to  patronize  these 
public  utilities  are  equally  affected  by  the  increas- 
ed rates  necessitated  by  increased  capitalization. 

All  rates  should  be  determined  by  the  amount 
of  capital  invested  in  the  agencies  employed  in 
the  business  of  transportation,  hence  increased 
ficticous  capital  carries  with  it  a  corresponding 
increase  in  its  rates  for  service  rendered,  and  the 
prudent,  non-investing  shipper  is  thereby  compel- 
led to  contribute  to  the  dividends  and  interest  up- 
on the  fictitious  capital,  which  in  the  present  case 
is  about  eight  times  the  amount  of  capital 
actually  required  for  the  construction  and  equip- 


31 
ment  of  this  public  utility.  , 

The  refusal  of  the  Interstate  Commerce  Com- 
mission to  accept  the  outstanding  liabilities  in  the 
form  of  stocks  and  bonds,  in  the  place  of  their 
real  capital  actually  invested,  as  a  basis  for  deter- 
mining rates,  constitutes  the  differences  between 
the  public,  represented  by  the  Interstate  Com- 
merce Commission,  and  the  railroad  officials, 
and  this  difference  may  be  as  great  as  the  dif- 
ference between  the  liabilities  of  a  looted,  ex- 
ploited railroad,  and  the  actual  amount  of  capital 
invested  in  its  construction;  this  difference  as 
appears  above  is  an  illustration  based  upon  actual 
results,  as  shown  by  the  Government  records, 

In  this  connection  an  excerpt  from  the  Report 
of  a  Committee  of  1887,  referred  to  above,  ap- 
pointed by  Congress  to  investigate  the  affairs 
of  the  Pacific  Railroads,  will  be  of  interest  to  the 
rate-paying  public: 

"Had  the  Pacific  Railroads  been  built  and  man- 
aged upon  honest  methods  and  the  Government 
loan  been  properly  applied,  a  six  per  cent  per  an- 
num could  have  been  declared  upon  all  moneys 
required  to  complete  and  equip  the  road,  and 
leave  the  road  worth  $124,000,000,  free  from  debt, 
and  at  the  same  time  could  have  reduced  their 
charges  to  shippers  nearly  $8,000,000  a  year." 


32 

This  report  also  gives  the  cost  of  the  construc- 
tion of  the  road  and  the  several  branches  includ- 
ed in  its  franchise  at  $95,955,347. 

Eight  million  dollars  a  year  from  the  first  op- 
erating of  this  road  up  to  the  present  time,  rep- 
resents a  sum  exceeding  $300,000,000  which  has 
been  obtained  from  the  public  through  extor- 
tionate rates. 

THE  DIFFERENT  VALUATIONS  PER  MILE  FOR 
DIFFERENT  PURPOSES 

Central  Pacific  Railroad 
Subsidies  and  Gov't  aids  'advanced  for  entire 

line  from  Missouri  River  to  Pacific 

$199,342  per  mile 

Appraisement    by    Congressional    Committee 

in  1887 ' $48,813  per  mile 

Capitalization  at  its  completion  by  R.  R.  Co. 

$144,321  per  mile 

Present  capitalization  by  S.   P.   Co 

, $363,526  per  mile 

Assessed  by  Board  of  Equalization  of  Cali- 
fornia for  taxes $28,539.30  per  mile 

$28,539.30  as  a  basis  for  taxation,  $368,526 
as  the  basis  for  transportation  rates  for  the  pub- 
lic, and  $144,321  as  the  basis  for  settlement  with 
the  Government  for  a  public  utility  which  cost 


33 


but  $48,813  per  mile  for  its  construction,  with 
$199,342  of  subsidies  and  Government  aids  to 
finance  it.  To  paraphrase  the  old  couplet  "He 
twists  the  text  to  suit  the  several  sects/'  it  might 
read  "They  change  the  base  to  suit  each  special 


case." 


Union  Pacific 

Appraisement  by  Cong.  Committee  in  1887 
$38,674  per  mile 

Capitalized  at  its  completion  by  R.  R.  Co 

$109,381  per  mile 

Present  capitalization  by  S.  P.  Co 

„ $51 1,718  per  mile 

In  these  widely  divergent  valuations — all  of 
which  have  been  utilized  by  the  railroad  company 
—the  settling  upon  a  definite  valuation  which 
can  be  accepted  in  all  business  transactions  is  at 
the  present  time  an  unsolved  problem  which  puz- 
zles Government  officials,  railroad  officials  with 
their  tax  expert,  and  the  public  as  well.  The 
valuation  of  public  utility  railroads  upon  a  per- 
manent and  stable  basis  for  all  business  transac- 
tions, with  all  its  gambling  features  eliminated, 
would  dispose  of  the  differences  now  arising  be- 
tween the  railroad  officials  and  the  public  and  at 
the  same  time  restore  that  public  confidence 


24 

which  has  been  lost  through  the  shifting  of  val- 

ues for  accomplishing  their  various  purposes. 

CREATION  AND  CONCEALMENT  OF  CORRUPTION 

FUNDS 

The  inability  of  the  Congressional  Investigat- 
ing Committee  to  obtain  access  to  the  books  of 
account  and  the  vouchers  relating  thereto  made 
it  impossible  to  secure  a  full  report  regarding 
these  transactions,  but  sufficient  was  secured  to 
reveal  the  methods  employed  in  the  distribution 
and  covering  of  these  trust  funds. 


item  reported  by  the  Congressional  Com- 
mittee is  the  sum  of  $25,866,235.63  of  unreport- 
ed  earnings,  apparently  set  aside  to  be  applied  to 
improper  purposes,  paid  out  on,  account  of  pools, 
subsidies,  rebates  and  overcharges. 

Another  item  is  an  expenditure  of  $4,818,355.- 
67  of  which  the  managers  declined  to  give  any 
explanation,  or  permit  others  to  explain,  most  of 
which,  as  shown  by  the  letters  of  Huntington, 
was  applied  to  corrupt  public  men  and  influence 
legislation. 

Another  item  amounting  to  the  sum  of  $5,- 
081,659.08  was  for  legal  expenses. 


35 

This  Committee  also  finds  "a  large  sum  ex-' 
pended  for  legislation  which  was  posted  under 
the  head  of  General  Expenses!'  General  ex- 
penses of  this  character  could  easily  absorb  this 
entire  fund  with  no  beneficial  results  to  the  gen- 
eral public. 

Such  methods  as  these  afford  &,  convenient 
and  safe  channel  through  which  the  Government 
millions  were  transferred  from  public  to  private 
interests  and  were  the  foundations  upon  which 
colossal  fortunes  were  built  at  the  expense  of  the 
public.  Enormous  profits  realized  from  non- 
competitive  contracts  made  by  themselves,  with 
themselves,  were  the  natural  result  of  such  con- 
ditions and  terms  as  Congress  gave  these  men. 

Such  existing  conditions  present  the  strong- 
est argument  imaginable  for  Government  inter- 
ference, and  especially  so  when  the  officials  of 
this  same  public  utility  are  at  the  present  time 
using  every  resource  to  compel  the  Interstate 
Commerce  Commission  to  approve  a  proposed 
increase  in  its  rates  to  pay  the  dividends  and  in- 
terest on  the  millions  of  dollars  represented  by 
these  fictitious  securities  which  they  issued  and 
sold  to  a  confiding  public. 

The  policy  adopted  in  the  management  of  this 


36 

public  utility  has  evidently  been  to  issue  stocks 
to  the  full  extent  of  the  earning  capacity  of  the 
road  for  paying"  dividends,  and  then  by  securing 
the  consent  of  these  duped  stockholders  for  a 
bonded  indebtedness;  upon  the  road,  another  har- 
vest of  the  people's  savings  is  placed  at  their  dis- 
posal. 

Under  such  a  system  a  prosperous  business 
produces  an  increased  issue  of  stocks,  and  a  de- 
cline which  reduces  the  income  calls  for  an  in- 
crease in  rates  tq  pay  dividends  on  the  stocks  is- 
sued in  times  of  prosperity,  such  as  is  being  ex- 
perienced now.  This  is  the  inevitable  result  of 
such  a  policy,  and  to  this  may  be  attributed  the 
present  fianancial  condition  which  has  forced 
one-sixth  of  the  railroads  of  the  United  States 
into  the  hands  of  a  receiver  in  bankruptcy,  while 
the  other  five-sixths  are  on  the  ragged  edge  of 
bankruptcy,  demanding  an  increase  in  rates  and 
a  decrease  in  their  taxes,  to  avoid  a  bankruptcy 
which  this  ruinous  policy  has  invited  by  this 
"now  you  have  it  and  now  you  don't"  game,  in 
which  the  investing  public  hold  only  "scraps  of 
paper"  of  questionable  value,  while  the  manip- 
ulators of  these  railroad  securities  control  the 
railroads,  the  incomes  and  the  proceeds — the 
hard-earned  savings  of  the  people — received  for 
these  fictitious  securities  they  have  unloaded  up- 


37 

on  the  people.  By  such  methods  eleven  groups  of 
capitalists  now  control  226,221  miles  out  of  a  to- 
tal mileage  of  246,816  miles  of  railroads  in  the 
United  States. 

This  crisis  in  railroad  circles  which  railroad 
manipulators  charge  to  Government  regulation 
was  brought  on  by  their  own  greedy  grafting, 
grabbing  methods. 

The  simple  record  of  this  public  utility  requires 
no  additional  evidence  to  convince  the  public  of 
the  absolute  necessity  for  Government  regulation 
to  protect  the  public  from  the  limitless  issue  of 
stocks  and  bonds  issued  greatly  in  excess  of  the 
real  value  of  the  properties  represented  therein, 
as  well  as  to  guard  against  the  extortionate  rates 
demanded  from  the  Interstate  Commerce  Com- 
mission for  paying  dividends  and  interest  on  this 
over-issue  of  stocks  and  bonds. 

After  the  many  years  of  unlimited  extrav- 
agance and  immunity  from  Government  inter- 
ference by  enforcement  of  the  anti-trust  law,  ev- 
ery effort  for  its  enforcement  is  resented  as  Gov- 
ernment interference  with  private  capital  and  as 
"drastic  legislation  tending  to  demoralize  bus- 
iness interests,"  and  its  vindictive  assaults  upon 
the  Administration,  made  through  a  subsidized 
press  for  the  purpose  of  creating  a  public  sen- 


SI 

timent  against  the  enforcement  of  the  anti-trust 
law,  are  in  full  accord  with  the  methods  em- 
ployed by  this  company  in  its  early  history;  in- 
defatigable, resolute,  resourceful,  it  resists  or 
evades  the  law  in  the  first  instance;  failing  in 
this,  it  creates  a  public  sentiment  to  obstruct  the 
Administration  in  its  enforcement  of  the  law,  in 
the  accomplishment  of  which  a  subsidized  press 
is  a  most  effective  agency;  the  subsidized  parti- 
san public  press  has  ever  been  the  favorite  tool 
of  tyranny  and  the  most  dangerous  and  subtle 
foe  to  personal  rights  and  human  liberties,  when 
employed  against  them  by  adverse  interests. 

In  the  enforcement  of  this  law  which  was  so 
long  ignored,  an  issue  has  been  forced  upon  the 
public,  an  "irrepressible  conflict"  between  those 
who  produce  the  wealth  of  the  country  and  those 
who  control  this  wealth.  This  issue  is  not  meas- 
ured alone  by  the  finances  involved,  but  extends 
to  the  personal  right  of  the  producing  classes  to 
live  and  labor  and  to  control  their  individual  bus- 
iness without  dictation  from  the  self-styled  "ag- 
ents of  the  Almighty,  to  distribute  the  wealth  of 
the  country." 

On  the  humanity  side  of  this  issue  are  the  in- 
dustrial classes,  the  working,  producing  public, 
the  bread-winners,  ranging  from  the  wage  earn- 


3P 

er  to  the  manufacturer, — whoever  lives  by  in- 
dustrious effort;  all  these  are  involved  in  this 
titanic  struggle  for  an  equal  chance  to  live  and 
exist. 

Against  these  are  arrayed  organized  capital 
(the  wealth  which  is  produced  by  the  industrial 
classes  themselves),  public  utility  officials,  banks, 
bankers,  insurance  companies,  loan  associations, 
speculating  syndicates  and  coupon-clipping  in- 
vestors, subsidized  public  newspapers,  quasi-re- 
ligious associations  inoculated  with  "high  fin- 
ance serum/'  and  such  employees  and  depend- 
ents as  are  forced  into  line  by  the  bread  and  but- 
ter "club"  in  order  to  create  a  veneering  of  hu- 
manity with  which  to  cover  the  inhumanity  of 
their  assaults  upon  the  producing  classes  and 
their  right  to  earn  a  livelihood;  to  this  may  be 
added  the  majority  of  the  six  hundred  and  twen- 
ty thousand  stockholder^  looking  for  the  fat  div- 
idends promised  by  the  officials  who  issued  and 
sold  to  the  public  these  millions  of  dollars  of  fic- 
titious securities,  also  the  army  of  local  and  for- 
eign bondholders  who  dictated  the  policy  and 
management  of  our  public  utilities  (before  the 
days  of  Government  regulation)  and  adjusted 
rates  necessary  to  provide  both  dividends  upon 
stocks,  and  interest  on  inflated  bonds  upon  which 
a  harvest  of  unearned  millions  was  gathered 


40 

from  the  public,  who  are  now  called  upon  to  re- 
pay these  fictitious  securities  as  well  as  interest 
and  dividends  thereon  in  increased  rates. 

These  unnatural  conditions  have  made  a  new 
alignment  of  contesting  forces,  a  re-arrangement 
in  both  the  political  and  industrial  issues.  In  this 
bitter  struggle  for  supremacy,  the  cold-blooded, 
heartless  policy  of  corporation  managers  in  the 
manipulating  and  controlling  of  the  industries 
and  industrial  classes  is  called  in  question.  The 
control  of  the  sources  from  which  wealth  is  de- 
rived— the  land,  the  mines,  the  minerals,  the  oil, 
the  coal,  the  timber,  as  well  as  the  transportation 
systems  necessary  to  convey  these  products  to 
the  market — necessarily  carries  with  it  the  con- 
trol of  the  labor  and  the  laborers  employed  in  its 
production,  as  well  as  the  wealth  derived  there- 
from; hence  by  this  process  of  absorption,  this 
modern  juggernaut  of  trusts  and  monopolies  has 
crushed  out  all  legitimate  competition  resulting 
from  the  natural  law  of  supply  and  demand 
which  should  regulate  prices,  and  in  its  place 
substituted  the  arbitrary  price  demanded  by  the 
trust,  regardless  of  the  rights  of  the  producers. 

By  this  new  alignment  the  disintegration  of 
political  parties  has  already  commenced,  party 
ties  are  being  ignored,  and  the  independent  bus- 
iness man  of  the  earlier  days  is  now  the  servant 


41 

of  a  moneyed  aristocracy  which  arbitrarily  dic- 
tates prices  and  rates  from  the  producer  to  the 
consumer,  for  both  seller  and  purchaser. 

Under  this  policy  inaugurated  by  those  who 
control  capital,  the  barrier  between  employer  and 
employee  is  being  obliterated;  the  unity  of  in- 
terest involved  in  the  harmonious  working  of 
employer  and  employee  against  this  government 
of  trusts  by  the  trusts,  in  favor  of  a  Government 
by  the  people  and  for  the  people,  is  evidenced  by 
the  actions  and  utterances  of  the  leading,  think- 
ing men  of  the  industrial  classes.  "To  hang  to- 
gether or  to  be  hung  separately"  is  the  choice 
given  the  industrial  classes  in  the  issue  now  made 
by  organized  capital  controlled  by  cold-blooded, 
soulless,  selfish  corporations. 

VALUATION  FOR  PUBLIC  UTILITIES 

Savings  banks  and  insurance  companies  hold 
about  one-tenth  of  these  fictitious  securities  is- 
sued by  these  manipulating  officials,  hence  are 
directly  interested  in  this  issue,  as  will  be  ob- 
served in  the  actions  of  the  bankers'  convention 
recently  held  at  Denver,  Colorado. 

At  this  convention  its  president  took  occasion 
to  put  in  a  plea  before  the  public  for  what  he 
terms  "a  fair  treatment  of  the  railroads."  He 
calls  for  (fa  new  alignment  of  public  thought  and 


42 

of  public  effort,  a  joining  of  shippers,  railroads 
and  investors  to  urge  upon  the  Interstate  Com- 
merce Commission  and  their  servants,  the  need 
of  the  country  for  good  equipments  and  ability 
to  push  developments  which  could  only  be  real- 
ized by  restoring  the  confidence  of  the  investing 
public,  and  until  that  time  we  will  never  get 
back  that  degree  of  prosperity  which  this  abund- 
antly resourceful  country,  when  given  a  fair 
chance,  is  capable  of." 

Ignoring  the  mis-application  of  the  millions 
of  dollars  collected  from  the  public,  which  if 
properly  used  should  have  made  ample  provision 
for  the  necessary  equipment  and  development  re- 
ferred to,  he  asserts  the  basis  of  valuation  for 
determining  rates  as  follows : 

"That  capital  will  not  be  attracted  by  figuring 
upon  what  has  been  invested  or  upon  any  cost  or 
physical  valuation  of  property,  but  that  the  value 
of  property  depends  upon  what  you  can  do  with 
it." 

This  public  utility  has  been  successfully  used 
by  its  officials  to  gather  and  control  the  earnings 
of  the  people,  amounting  to  about  eight  times  the 
cost  of  its  construction,  according  to  the  fictitious 
securities  now  held  by  the  investing  public,  and 


43 

to  secure  interest  and  dividends  upon  these  hold- 
ings, the  banking  capitalists  advise  "a  joining  of 
shippers  (rebaters?),  railroads  and  investors  to 
urge  upon  the  Interstate  Commerce  Commission 
and  its  servants"  the  need  of  good  equipments 
and  to  push  developments. 

This  Interstate  'Commerce  Commission  was 
also  reminded  by  this  convention  that  "they  were 
created  not  only  as  guardians  for  the  shipper  but 
also  for  railroads,  and  that  if  these  were  to  suc- 
ceed in  their  service  to  the  public,  a  new  vision 
and  a  new  disposition  on  the  part  of  this  commis- 
sion must  be  brought  about  by  the  pressure  of  the 
business  world''  and  that  "this  view  is  at  last 
taking  hold  of  the  business  world." 

From  the  banker's  viewpoint,  this  new  vision 
to  be  impressed  upon  the  commission  is,  interest 
and  dividends  upon  the  millions  of  fictitious  cap- 
ital which  they  hold;  from  the  viewpoint  of  the 
public  it  is  a  corresponding  increase  of  rates  to 
be  paid  by  the  public  in  its  use  of  a  public  utility. 

The  pressure  of  the  business  world  is  to  be 
brought  in  opposition  to  the  Government  regula- 
tion so  far  as  it  affects  the  interests  of  capital- 
ists. 

The  statement  of  this  banker  president  that 


"this  view  is  at  last  taking  hold  of  the  business 
world"  is  evidenced  by  the  activities  lately  mani- 
fested in  various  directions,  extending  even  to 
the  control  and  utilizing  of  the  sources  through 
which  the  general  public  ordinarily  obtains  its 
information,  and  having  once  secured  control  of 
these  agencies,  the  suppression  and  concealment 
of  facts  which  are  vital  to  the  public  is  easily  ac- 
complished and  false  or  misleading  statements 
calculated  to  create  a  public  sentiment  favorable 
to  the  interests  involved,  is  spread  broadcast 
throughout  the  country.  In  this  way  the  public 
press  is  effectively  used  to  create  and  direct  this 
pressure  of  the  business  zvorld  in  the  enforcement 
of  the  demands  of  the  speculating  capitalistic 
classes  in  the  control  of  the  wealth  and  wealth- 
producing  classes. 

THE  METROPOLITAN  PRESS  AS  AN  ALLY 
An  illustration  of  this  situation  was  recently 
given  when  the  president  of  a  transcontinental 
railroad,  under  the  conspicuous  heading 

"DRASTIC  REGULATION  INJURIOUS  TO  RAIL- 
ROADS/' 

makes  the  statement  that  "the  public  temper  has 
been  in  favor  of  drastic  regulation  until  the  man 
with  savings  is  willing  to  invest  them  in  almost 


45 

anything  else,  rather  than  in  public  utilities  that 
are  regulated,"  and  he  designates  regulation  as 
"an  effort  to  control  private  capital  as  if  it  were 
public  money" ! 

He  says  that  "railroads  are  treated  with  mis- 
trust, and  mistrust  has  caused  a  withdrawal  of 
public  confidence  and  produced  a  general  busi- 
ness timidity  from  which  has  resulted  the  long 
business  period  of  unemployment  and  ;distres, 
the  like  of  which  has  never  before  been  known/' 

Reasoning  from  this  condition,  he  asserts  that 
"when  the  employer  is  prosperous  his  employees 
have  employment  at  good  wages  and  are  pros- 
perous, and  when  the  people  who  work  discover 
that  this  condition  improves,  just  as  soon  as  their 
employer  is  prosperous,  we  will  have  some  prom- 
ise of  relief.  We  will  have  to  learn  that  we  are 
one  big  industrial  family,  we  are  all  prospered 
together,  or  we  are  not  prospered  at  all." 

The  suggestion  here  held  out  to  the  general 
public  is  that  the  railroad,  as  the  arbiter  of  all 
our  industries,  must  be  made  prosperous  by  the 
"man  with  savings"  before  the  general  public 
can  hope  for  prosperity.  In  short,  that  the  pros- 
perity of  the  public  can  come  only  through  a  pros- 
perous railroad  company. 


40 

Both  the  facts  and  the  admissions  of  the  writ- 
er of  the  article  above  quoted  show  a  strained 
and  unsuccessful  effort  to  hold  Government  reg- 
ulation and  the  unwillingness  of  the  "man  of  sav- 
ings" to  further  invest,  as  responsible  for  the 
conditions  he  so  graphically  describes. 

The  plundering  of  the  public  by  the  officials  in 
control  of  a  public  utility  was  the  occasion  and 
necessity  for  Government  intervention  or  reg- 
ulation which  is  now  complained  of. 

The  difference  between  the  true,  physical  val- 
ue, and  the  fictitious  values  represented  by  the 
watered  stocks  and  bonds  which  have  been  sold 
by  these  officials  to  the  public,  is  the  foundation 
of  the  complaint  of  "drastic  regulation";  and  the 
refusal  of  the  Administration's  Commissions  to 
approve  and  sanction  the  issuing  and  sale  of 
stocks  and  bonds  in  excess  of  the  true  value  of 
the  properties  affected,  or  to  use  fictitious  capital 
as  a  basis  for  increasing  the  rates  of  transporta- 
tion to  be  paid  by  the, patronizing  public,  consti- 
tutes this  "drastic  regulation"  which  capital  now 
calls  for  a  pressure  of  the  business  world  to  op- 
pose. 

This  business  depression,  "this  period  of  un- 
employment and  distress"  came  not  through  reg- 


47 

ulation,  but  came  through  a  lack  of  regulating 
the  dishonest  practices  of  non-regulated  public 
officials  in  the  control  of  a  public  utility. 

To  create  a  favorable  sentiment  this  official, 
at  the  head  of  this  public  utility,  builds  upon  the 
false  premise  that  the  regulation  of  the  predatory 
methods  which  are  employed  in  the  management 
of  a  public  utility,  is  injurious  to  legitimate  bus- 
iness, and  his  deductions  derived  therefrom  to 
maintain  his  declarations  are  illogical  and  fal- 
lacious. 

In  this  presentation  through  the  public  press 
he  gets  the  cart  before  the  horse,  and  substitutes 
effect  for  cause  in  an  effort  to  justify  this  un- 
warranted assault  upon  the  Government  and  the 
investing  public,  as  his  declarations  above  quot- 
ed will  show. 

This  "period  of  unemployment  and  distress," 
he  therein  admits,  "resulted  from  business  tim- 
idity/' and  this  business  timidity  uwas  produced 
by  the  withdrawal  of  public  confidence/'  and  the 
withdrawal  of  public  confidence  was  due  to  the 
mistrust  of  the  public.  What  caused  this  mis- 
trust, and  what  this  mistrust  caused  to  be  done, 
will  place  the  responsibility  for  the  present  condi- 
tions where  it  properly  belongs. 


48 

There  was  no  apparent  distrust  by  tHe  public 
until  the  misappropriations  of  many  millions  of 
dollars  of  the  public  money  had  destroyed  public 
confidence  in  these  officials  who  were  reaping 
a  still  greater  harvest  by  selling  ficticious  secur- 
ities to  the  confiding  public;  up  to  this  time  no 
Government  regulation  was  exercised,  it  had 
slumbered  until  a  plundered  public  demanded  pro- 
tection from  the  extortions  exacted  by  unfaithful 
and  unscrupulous  officials  controlling  the  public 
utilities. 

As  effect  must  always  follow  cause  this  Gov- 
ernment regulation  which  came  after  mistrust, 
after  wihtdrawal  of  public  confidence  and  after 
businss  imidity,  they  must  be  classed  as  the 
effect  rather  than  the  cause,  and  this  attempted 
substitution  of  effect  or  cause,  in  order  to  preju- 
dice and  mislead  the  public  against  the  adminis- 
tration of  the  law,  shows  either  an  intentional 
pervertion  of  the  facts  or  a  brain  so  saturated  by 
railroad  interests  as  to  be  unable  to  descern  be- 
tween things  that  are  real  and  things  that  are 
imaginary;  the  active  participation  in  the  crea- 
tion and  employment  of  ficticious  capital  for  busi- 
ness purposes  for  a  long  period  of  years  may  ac- 
count for  this  substitution  of  affect  for  cause ;  so 
long  as  the  public  press  will  take  it  at  full  value 
and  not  permit  contradiction  in  its  columns. 


49 

A  reply  to  the  metropolitan  papers  which  pub- 
lished this  article  of  the  railroad  official  was  re- 
turned unpublished,  with  the  explanation  that 
any  public  statement  issued  by  a  railway  presi- 
dent, or  any  man  of  large  affairs,  or  in  the  public 
eye  and  news  as  conspicuous  as  the  writer  of  the 
railroad  article  is  news  in  the  sense  of  that  word 
in  newspaper  offices."  "On  the  other  hand  any 
discussion  which  the  statement  might  start, 
would  cease  to  be  news  immediately  and  become 
a  discussion/' 

When  the  public  press  is  open  to  ((any  state- 
ment made  by  a  railroad  president,  or  any  man 
of  large  affairs" — whether  false  or  misleading 
or  true — and  the  public  are  excluded  from  any  re- 
ply thereto,  no  comment  is  needed  to  define  the 
attitude  of  the  large  metropolian  press  of  the 
country. 

How  PRESSURE  OF  THE  BUSINESS  WORLD  Is 
ACCOMPLISHED  THROUGH  THE  Y. 
M.  C.  A.  OF  NEW  YORK 

The  persistency  and  the  resourcefulness  of  the 
capitalistic  leaders  in  the  promulgation  of  the 
new  thought  and  the  new  alignment  is  apparent 
in  its  recent  utilization  of  the  Y.  M.  C.  A.  of  New 
York  in  carrying  on  its  missionary  work. 


50 

A  lecture  bureau  composed  of  leading  capital- 
ists, the  General  Electric  Company,  prominent 
electric,  lighting,  gas,  water  and  power  compan- 
ies, the  Westinghouse  company,  brokers,  bankers 
and  capitalists  and  other  Wall  Street  magnates, 
including  the  House  of  J.  P.  Morgan  &  Com- 
pany provides  free  lectures  to  be  delivered  before 
the  Y.  M.  C.  A.  of  New  York,  which  are  print- 
ed and  distributed  to  the  public,  as  the  literature 
of  the  Y.  M.  C.  A.  of  New  York,  being  issued 
under  the  auspices  of  the  Y.  M.  C.  A.  of  New 
York  it  has  the  apparent  endorsement  of  an  as- 
sociation of  625,599  members  with  497  libraries 
to  aid  its  distribution,  and  over  550,000  student 
young  men,  just  entering  upon  the  business 
ness  activities  of  the  business  world.  In  this  man- 
manner  the  doctrine  of  high  finance  as  taught 
by  the  free  lectures  furnished  by  the  Wall  Street 
magnates  is  brought  to  bear  upon  over  one  mil- 
lion of  the  most  active  participants  in  the  busi- 
ness and  industrial  world  of  the  near  future. 

These  illustrate  but  two  of  the  many  ways 
through  which  the  pressure  of  the  business  world 
is  being  utalized  to  perpetuate  the  power  of  those 
who  control  the  wealth  and  the  wealth  producing 
classes  of  the  country. 

Since  capital  has  forced  upon  the  public  this 


51 

alignment  of  parties  a  clear  issue  has  been  raised 
between  those  who  produce  the  wealth — this  in- 
cludes all  those  who  obtain  a  livelihood  by  their 
industry — and  the  non-producing  classes  who 
control  the  wealth  which  others  have  created. 
The  cause  of  this  irrepressible  conflict  was  forc- 
ibly expressed  by  the  French  Assembly  in  1788 
in  these  words:  "Ignorance  and  contempt  of 
human  rights  are  the  cause  of  all  public  misfor- 
tune and  corruption  of  government."  This  pres- 
sure of  the  business  world  is  controlled  and  mar- 
shaled by  capitalists  to  oppose  the  Government 
in  its  protection  of  human  rights,  and  is  a  grave 
cause  of  alarm  for  the  industrious  and  wealth- 
producing  classes  who,  with  reason,  are  asking 
the  same  question  which  the  rich  ruler  was  ask- 
ing centuries  ago,  "What  must  I  do  to  be 
saved?'7 

This  condition  has  brought  to  the  forefront 
the  question  of  Government  regulation  and  Gov- 
ernment ownership,  which  will  demand  the 
thoughtful  consideration  of  the  public  in  future, 
and  will  form  an  issue  in  the  coming  political 
campaigns.  For  this  reason  a  brief  summary 
of  what  has  been  done  under  the  name  of  public 
utility  in  the  past,  under  the  management  and 
control  of  this  wealth-distributing  class,  will  be 
of  interest  to  the  public  at  this  time. 


52 

It  is  evident  from  the  reports  of  the  Congres- 
sional Committee  appointed  to  investigate  the  af- 
fairs of  this  Pacific  Railroad,  that  this  public 
uility,  "under  honest  methods,"  could  have  been 
constructed  for  $95,955,347  and  with  its  equip- 
ments, was  valued  at  $124,000,000  in  1887;  that 
the  officials  controlling  and  operating  it  have 
received  in  Government  aids,  bonds,  stocks  and 
net  earnings,  the  approximate  sum  of  $1,501,- 
794,036  in  excess  of  the  cost  of  construction  and 
the  cost  of  operating  up  to  1915. 

Had  the  Government  received  this  amount 
of  money  for  the  construction  and  operating  of 
this  same  public  utility,  it  could  have  paid  for  the 
entire  construction  of  the  road,  and  all  the  ex- 
penses of  operating  the  same,  the  entire  bond  in- 
debtedness for  advances  in  aid  of  its  construc- 
tion, with  all  the  maturing  interests,  and  still 
have  a  balance  of  approximately  the  sum  of 
$933,421-299;  and  after  paying  the  bonded  indebt- 
edness incurred  subsequent  to  the  completion  of 
the  road,  it  would  still  leave  a  balance  of  $543,- 
066,293  for  equipments  and  dividends.  As  the 
estimate  is  based  upon  public  records  and  Gov- 
ernment reports,  it  may  not  coincide  with  the  re- 
ports given  to  the  public  through  a  subsidized 
press  by  the  officials  of  the  road  as  prepared  by 
its  expert  book-keepers,  if  however  the  public  in 


S3 

relying  upon  records  is  in  error,  it  is  for  the  of- 
ficials of  this  public  utility  to  restore  public  con- 
fidence by  an  accounting  for  this  large  sum  real- 
ized from  the  savings  of  the  public,  which  is  not 
explained  in  the  records  available  to  the  general 
public,  hence  its  mistrust  and  lack  of  confidence. 

In  view  of  this  situation  the  public  may  profit- 
ably recall  the  past  history  of  this  public  utility, 
and  refresh  its  recollection  of  some  of  the  evil  re- 
sults which  have  followed  from  this  unregulated 
unruled  management  of  this  public  utility. 

The  introduction  and  establishment  of  Chinese 
labor  in  the  construction  of  this  public  utility 
was  the  beginning  of  our  oriental  troubles;  the 
creation  of  the  lumber  trust  of  the  Pacific 
Coast  was  the  work  of  this  company,  in  selling 
over  three  hundred  thousand  acres  of  timber 
land  to  thirty-nine  timber  barons,  which,  under 
the  terms  of  the  grant,  could  be  sold  or  disposed 
of  only  to  actual  settlers  in  quantities  not  ex- 
ceeding one  quarter  section  to  a  single  purchaser, 
and  at  the  Government  price  of  $2.50  per  acre. 
This  sale  to  these  thirty-nine  timber  barons  at  an 
average  price  of  $7.50  per  acre  was  in  direct  vio- 
lation of  the  provision  of  the  grant  under  which 
this  company  held  the  lands,  and  by  this  act  the 
rights  of  the  home  settlers  were  made  subordi- 


54 

nate  to  the  speculating  interests  of  the  lumber 
trust.  The  2,300,000  acre  land  grab  in  Ore- 
gon, the  cold-blooded  shooting  and  ejecting  of 
the  actual  settlers  from  the  homes  they  had  made 
in  the  Mussel  Slough  district,  with  the  consent 
and  at  the  request  of  this  company,  stands  as  a 
bloody  record  of  lawless  greed,  this  with  the  mil- 
lions of  dollars  of  oil  and  mineral  lands  unlaw- 
fully appropriated,  while  it  maintains  its  strang- 
ling grasp  upon  the  industries  and  industrial 
workers  of  this  Pacific  Coast,  clearly  demon- 
strates the  spirit  and  purpose  which  actuates  this 
colossal  capitalistic  monopoly  in  its  defiance  of 
law  and  its  contempt  of  human  rights. 

It  is  not  unreasonable  to  believe  that  what  has 
been  done  in  the  past  will  be  repeated  in  the  fu- 
ture when  favorable  opportunity  is  afforded,  hence 
in  the  consideration  of  Government  ownership 
or  Government  regulation  the  general  public 
must  feel  more  secure  under  the  protecting  care 
of  the  Government,  than  under  the  care  of  a  cap- 
italistic monopoly  whose  protection  in  the  past 
has  been  such  protection  as  vultures  give  to 
lambs,  covering  and  devouring  them." 

While  these  unnumbered  millions  have  passed 
from  the  public  into  the  control  of  the  officials 
of  this  public  utility,  they  are  still  clamoring  for 


55 

further  investments  by  the  men  with  savings, 
for  an  increase  in  its  rates  for  service,  for  a  de- 
crease in  its  taxation,  and  a  limitation  of  its  lia- 
bilities to  the  public,  and  these  public  records  in- 
dicate that  the  Government  regulation  of  the  past 
has  been  a  failure  and  that  efficient  Regulation  by 
the  present  or  future  Administrations  will  be  re- 
sisted with  all  the  pressure  of  the  business  zvorld 
a  capitalized  monopoly  can  command. 


56 

TAXATION 

Taxation  is  a  necessary  incident  of  civiliza- 
tion. Originally  it  was  limited  to  a  personal 
service  and  attached  only  to  land,  which  was  the 
only  source  of  revenue  to  the  ancient  kings.  The 
ancient  levies  were  in  the  nature  of  a  modern 
land  tax,  when  every  tenant  of  a  knight  fee  was 
bound'  if  called  upon,  to  attend  the  king  in  his 
army  for  forty  days  in  every  year.  Later,  as 
this  personal  attendance  became  irksome,  the 
tenants  found  means  of  compounding  it,  first  by 
sending  others  in  their  places,  and  subsequently 
by  making  pecuniary  satisfaction  in  lieu  thereof. 

This  pecuniary  satisfaction  at  last  came  to  be 
levied  at  so  much  for  every  knight's  fee,  which 
was  first  levied  in  the  time  of  Henry  the  Second. 
This  precedent  was  afterward  used  by  the  king 
as  a  means!  of  oppression  in  levying  on  the  land- 
holders whenever  kings  went  to  war,  in  order  to 
hire  mercenary  troops  and  pay  their  contingent 
expenses. 

By  the  abuse  of  this  precedent  the  annual  or 
perpetual  tax  rate  of  one-fifteenth  part  of  the  val- 
ue of  every  township,  borough  and  city  in  the 
kingdom,  which  established  a  certain  sum  to  be 
raised  each  year,  was  substituted  for  an  uncer- 


57 

tain  amount  dependent  upon  the  whims  or  neces- 
sities of  the  king. 

The  extortions  which  followed  this  abuse  of 
precedent  became  a  matter  of  national  complaint 
and  culminated  in  the  demand  for  the  Magna 
Charta  which  King  John  was  forced  to  give  to 
the  people,  wherein  it  was  provided  that  this  tax 
should  not  be  imposed  without  the  consent  of  the 
common  council  of  the  realm.  As  the  inherent 
hereditary  revenues  of  the  king  were  from  time 
to  time  granted  out,  the  king  was  in  some  meas- 
ure dependent  upon  the  people  for  part  of  the 
royal  revenue. 

About  the  time  of  King  Richard  II  and  Henry 
IV  the  assessment  of  lands  fell  into  disuse  by  the 
introduction  of  subsidies,  which  was  a  tax  upon 
personal  property  as  well  as  lands.  This  had  be- 
come necessary  owing  to  the  large  grants  of 
lands  to  the  barons,  dukes,  earls  and  court  favor- 
ites, from  which  lands  the  king's  revenues  were 
derived. 

This  tax  was  not  imposed  upon  property,  but 
upon  persons  in  respect  to  their  reputed  estates, 
which  included  lands  as  well  as  goods,  thereby 
shifting  a  large  share  of  the  burden  of  taxation 
from  the  land-owning  barons  and  court  favorites 
to  the  landless  tenants  and  middle  classes.  This 


58 

tax  was  assessed  at  double  the  amount  for  aliens. 
The  method  of  raising  this  tax  was  charging  a 
particular  sum  against  each  county,  according  to 
the  valuation  given,  and  this  sum  was  assessed 
and  raised  upon  individuals  (their  personal  as 
well  as  individual  estates  being  liable  thereto) 
by  commissioners  appointed  in  the  Act,  who  were 
the  principal  land-holders  of  the  county  and  their 
officers. 

This  was  styled  the  annual  tax.  To  this  was 
added  the  annual  tax  on  malt.  Besides  the  an- 
nual taxes  were  the  perpetual  taxes,  which  also 
applied  to  the  masses,  and  wlrch  assisted  in 
lightening  the  taxes  of  the  nobility  owning  lands 
under  the  grants  from  the  Crown,  for  in  propor- 
tion to  the  decrease  in  revenues  resulting  from 
the  withdrawal  of  these  lands  from  assessment, 
by  the  same  proportion  were  the  taxes  of  the 
masses  increased,  for  the  revenues  must  be  paid 
in  full  regardless  of  the  decrease  in  resources 
resulting  from  these  grants  by  the  Crown;  the 
masses  made  up  the  loss. 

The  nine  perpetual  taxes  on  persons  were  as 
follows,  and  may  well  be  accredited  with  the  old 
saying  "Death  and  taxation  are  certain": 

First.    The  customs  tax  of  duties,  toll,  tribute 


59 

or  tariff,  payable  on  merchandise  exported  or  im- 
ported. 

Second.  The  excise  tax,  which  is  the  inland 
imposition,  paid  sometimes  upon  the  consump- 
tion of  the  commodity;  frequently,  upon  the  re- 
tail sale  which  is  the  last  stage  before  consump- 
tion. 

Third.    Tax  upon  salt. 

Fourth.    Duty  for  carriage  of  letters. 

Fifth.  The  tax  imposed  on  parchment  and  pa- 
pers whereon  legal  proceedings  or  private  instru- 
ments of  almost  any  nature  whatsoever  are  writ- 
ten. 

Sixth.  Duty  upon  houses  and  windows,  upon 
every  chimney  in  the  house,  and  upon  every 
hearth  in  the  Kingdom. 

Seventh.  A  duty  of  twenty-one  shillings  per 
annum  for  every  male  servant  retained  or  em- 
ployed in  several  capacities  mentioned  as  speci- 
fied. 

Eighth.  Licenses  upon  hackney  coaches  and 
chairs  in  London  and  the  parks  adjacent. 

Ninth.  Duties  upon  offices  and  pensions, 
which  was  practically  a  five  per  cent  income  tax. 


60 

Shifting  the  burden  of  supplying  the  king's 
revenue  from  land  and  land-owners  to  the  masses 
by  a  government  composed  of  land-owners  or 
landlord  barons,  has  its  parallel  in  our  own  Re- 
public. It  is  another  demonstration  of  history 
repeating  itself  in  a  republic  as  well  as  in  a  mon- 
archical government.  The  prominent  and  dis- 
tinguishing feature  running  through  these  dif- 
ferent legislative  changes  is  the  placing  of  the 
burden  of  taxation  primarily  upon  the  laboring 
classes  when  they  held  and  occupied  the  land,  and 
later  when  the  land  had  passed  into  the  posses- 
sion of  the  barons  and  lords,  the  burden  was  shift- 
ed from  the  lands  and  passed  to  the  laborers 
again  by  the  use  of  the  indirect  system  of  taxa- 
tion as  described  above. 

Parliament  was  a  body  of  land-owners ;  hence 
both  the  incentive  and  power  to  accomplish  this 
change.  Taxation  gravitates  to  the  masses  as 
metal  is  attracted  toward  a  magnet  the  world  ov- 
er. On  the  Continent,  taxation  of  land  and  tax- 
ation of  personal  property  came  singly,  one  at  a 
time.  When  the  vassals  had  possession  of  the 
lands,  the  land  alone  supplied  the  king's  revenue. 
Subsequently,  when  these  small  holdings  were 

centered  in  the  nobility,  the  barons,  the  earls, 
the  dukes,  the  lords  and  other  titled  members  of 


61 

the  king's  household,  then  the  assessment  of  the 
persons  and  personal  property  came  with  relent- 
less vigor.  It  was  not  satisfied  with  toll,  tariff, 
excise  tax,  tax  on  salt,  carriage  license,  marriage 
license  and  death  certificate,  but  sent  its  public 
officers,  appointed  by  the  crown,  every  year  to 
view  the  inside  of  the  house,  to  count  the  win- 
dows and  doors,  chimneys  and  hearthstones,  to 
supply  the  king's  revenue,  which  had  been  de- 
pleted by  the  granting  of  these  lands  to  the  no- 
bility. The  means  employed  to  create  the  pres- 
ent conditions  in  our  Republic  may  differ  in  form, 
yet  the  results  have  been  substantially  the  same, 
in  placing  the  burden  of  taxation  upon  the  labor- 
ing and  middle  classes,  relieving  the  non-produc- 
ing and  leisurely  class  of  the  burden  of  taxation. 

Primarily  agriculture  held  the  foremost  place 
among  the  industries  of  this  Republic,  both  as 
to  numbers  employed  and  as  to  capital  invested. 
This  condition  prevailed  for  several  decades,  and 
during  this  period  there  was  comparatively  little 
assessable  property  in  sight,  except  the  land  and 
the  property  used  thereon,  which  was  always  a- 
vailable  for  taxation.  As  the  country  grew  and  the 
population  increased  the  needs  of  the  Govern- 
ment grew  in  proportion,  and  a  corresponding 
increase  in  revenues  was  required. 


62 

In  addition  to  these  ordinary  expenses  were 
added  the  debts  incurred  in  the  war  with  Great 
Britain,  in  the  struggle  for  independence. 

This  burden  fell  to  the  lot  of  our  forefathers 
and  through  labor  and  land  was  honorably  dis- 
charged. During  this  time  other  industries  were 
being  established;  manufactures  and  mining 
came  hand  in  hand,  to  be  followed  by  railroads, 
the  telegraph  and  the  telephone, — all  necessary 
accompaniments  of  an  advancing  civilization, 
and  all  heartily  welcome  as  co-helpers  in  our 
growing  Republic,  not  only  by  words  but  by  sub- 
stantial subsidies,  lands  for  rights  of  way  and 
for  factory  sites,  subscriptions  for  stock,  bonds 
to  be  paid  by  assessments  on  the  lands  already 
overburdened  by  taxation.  These  young  indus- 
tries increased  more  rapidly  in  business  import- 
ance than  the  assessment  roll  indicated,  which 
resulted  in  more  mouths  to  feed,  more  people  for 
Government  oversight,  with  a  correspondingly 
increased  demand  for  Government  revenue,  with- 
out a  corresponding  increase  of  taxable  prop- 
erty from  which  to  supply  the  increase  demanded 
by  the  rapidly  increasing  population,  the  major- 
ity of  whom  are  neither  food  producers  nor  tax- 
payers. Under  these  conditions  about  ninety 
per  cent  of  the  Government  revenues  were  con- 


63 

tributed  from  the  farms  and  farm  properties 
during  the  first  century  of  our  existence  as  a 
nation.  Meanwhile,  the  manufacturing  in- 
dustries, being  fostered  by  Government  sub- 
sidies, made  more  rapid  progress  than  agricul- 
ture, which  during  this  period  was  left  to  care 
for  itself,  subject,  however,  to  a  tariff  tax  levied 
in  the  interest  of  the  industries. 

Under  these  conditions  our  modern  legislators 
have  closely  followed  the  example  of  their  Eng- 
lish cousins  in  the  British  Parliament  by  legis- 
lating the  burden  of  taxation  upon  the  laboring 
and  middle  classes,  while  favoring  the  moneyed 
interests,  monopolists,  trusts  and  non-producing 
classes,  as  is  shown  by  a  comparison  of  the  tax- 
ation of  different  interests  under  the  different 
methods  of  assessing  the  various  interests. 

The  agriculturalist,  taxed  upon  a  property 
basis,  is  assessed  as  follows: 

First.    A  poll  tax. 

Second.    A  tax  upon  the  land  and  buildings. 

Third.  A  tax  upon  all  implements  of  husband- 
ry used  in  cultivating  the  land  and  harvesting 
the  crop  (income). 

Fourth.    A  tax  upon  the  team  used  in  cultivat- 


64 

inng  the  land  in  producing  the  crop  which  con- 
stitutes the  income;  also  upon  all  poultry,  cows, 
hogs  or  other  stock  as  well  as  personal  property 
of  every  description,  not  specifically  classed  as 
exempt  under  the  State  laws. 

Fifth.  An  additional  tax  upon  each  bearing 
fruit  tree,  grape  vine  or  growing  alfalfa  field. 
While  these  added  improvements  which  are  cre- 
ated by  the  labor  of  the  land-owner  and  produce 
additional  wealth  for  the  State,  as  well  as  add 
to  the  resources  of  the  Government,  an  addition- 
al assessment  of  about  $50  per  acre  (penalty?) 
is  added  for  trees  and  $15  per  acre  for  alfalfa. 
A  penalty  for  the  non-producing  owner  of  un- 
cultivated lands,  for  misappropriating  the  Gov- 
ernment resources,  and  a  premium  for  the  crea- 
tion of  increasing  revenues,  would  be  more  ap- 
propriate, and  a  greater  incentive  to  the  indus- 
try and  industrious  owner. 

Sixth.  The  products  of  this  poll  taxed,  tool 
taxed,  team  taxed,  land  taxed,  tree  taxed  ag- 
riculturalist, are  subject  to  another  tax  upon  the 
crop  produced,  provided  it  is  not  disposed  of  be- 
fore the  date  designated  by  law  for  making  the 
assessment. 

Seventh.    The  income  tax  is  still  waiting,  for 


65 

whatever  amount  may  exceed  the  $3000  exemp- 
tion from  this  six  times  taxed  property  already. 

Eighth.  Last  but  not  least  is  the  indirect  tax, 
which  reaches  land-owner  and  landless  alike.  It 
commences  with  our  existence  and  ends  only  in 
death;  it  collects  on  delivery,  and  is  as  heartless 
and  unfeeling  as  a  corporation  trust.  It  was  cre- 
ated for  monopolies  and  trusts  to  exact  tribute  on 
the  necessities  of  life;  be  it  tea,  coffee,  sugar, 
implements  of  husbandry  for  the  farm,  the  gar- 
ment we  wear,  the  food  we  eat  or  the  material  of 
the  house  which  shelters  us,  it  must  be  paid.  It 
was  this  heartless  and  cruel  system  which  placed 
a  tax  upon  every  house  or  hovel,  every  chimney, 
window  and  hearth  in  England,  and  forced  our 
forefathers  across  the  seas  in  search  of  freedom. 
It  was  this  which  nerved  them  through  the 
bloody  struggle  with  the  mother  country  in  the 
days  of  the  Revolution;  it  was  this  which  in- 
spired that  immortal  declaration  of  equal  rights 
upon  which  they  (supposedly)  founded  this  Gov- 
ernment. .  This  creator  of  monopolies,  trusts 
and  multi-millionaires,  which  we  call  tariff. 

Ninth.  When  dead  and  buried  taxation  still 
survives,  for  the  inheritance  tax  still  hovers  ov- 
er the  grave  to  take  its  toll  on  whatever  escapes 
the  greedy  grasp  of  the  tax-law,  during  his  life 
of  labor, 


66 

While  the  wealth-producing,  industrial  classes 
are  struggling  under  the  heavy  burden  of  taxa- 
tion, the  non-producing  classes,  including  non- 
residents and  foreign  syndicates  owning  lands 
which  are  increased  in  value  by  community  labor, 
are  relieved  from  the  main  burden  of  taxation 
under  the  present  system  of  raising  revenues  for 
the  Government,  as  ordained  by  the  organized 
forces  which  dominate  elections  and  thereby  con- 
trol the  Government. 

The  above  list  of  enumerated  taxes  applies  to 
the  owners  of  improved  farms,  which  constitute 
less  than  six  per  cent  of  the  population  of  the 
United  States  according  to  the  census,  reports  of 
1912.  Of  the  balance  of  the  ninety-six  per  cent 
of  the  population,  five  and  one-half  per  cent  are 
engaged  in  agriculture,  either  as  laborers  or 
farmers'  wives,  making  a  total  of  less  than  eleven 
per  cent  of  the  food-producing  class.  Out  of  this 
balance  of  eighty-nine  per  cent  of  the  popula- 
tion, a  large  proportion  are  practically  exempt 
from  property  taxation. 

The  professional,  the  domestic  and  personal 
service  as  well  as  wage-earners,  tradesmen  and 
traders,  clerks,  bookkeepers,  bankers  and  the 
army  of  transportation  and  Government  service 
men  have  little  assessible  property  in  sight  when 


07 

the  assessment  roll  is  made  up.  One  is  almost 
justified  in  accepting  the  classification  once  made, 
that  "the  world  is  made  up  of  three  classes,  viz., 
wealth  producers,  beggars  and  thieves/'  with  a 
ratio  of  producers  as  eleven  to  eighty-nine  per 
cent. 

That  larger  class  of  our  community  who  cre- 
ate no  material  wealth  for  the  nation  are  receiv- 
ing incomes  equal  in  amount  to,  if  not  greater 
than  those  of  the  wealth  producing  class.  All 
these  several  classes  demand  and  secure  equal 
protection  of  life,  liberty  and  security  in  the  pur- 
suit of  happiness;  hence  they  should  and  under 
just  and  equitable  laws  would  be  compelled  to 
bear  their  equitable  proportion  of  the  expenses  of 
maintaining  that  protecting  Government. 

Taxation  based  upon  tangible  and  visible  prop- 
erty only,  is  unjust  and  wrong  both  in  principle 
and  in  practice,  and  can  be  justified  only  upon  the 
assumption  that  property  alone  is  a  subject  for 
Government  protection.  The  Declaration  of  In- 
dependence guarantees  protection  to  life,  liberty 
and  the  pursuit  of  happiness  as  well  as  property. 
The  protecting  arm  of  the  Government  is  as  nec- 
essary and  is  as  equally  demanded  and  enjoyed 
by  the  landless  as  by  the  land-owner;  therefore 
the  burden  of  supporting  the  Government  should 


68 

be  equally  shared  by  all  who  receive  its  benefits. 
A  careful  analysis  of  the  basis  of  taxation  will 
demonstrate  this  to  be  logically  and  equitably 
correct. 

The  standard  by  which  property  values  are 
estimated  is  the  income  or  revenue  derived  there- 
from; hence  in  the  assessment  of  land  and  all 
land  properties  the  valuation  of  assessment  is  de- 
termined by  the  amount  of  revenue  it  produces, 
or  income 

The  terms  revenue  and  income  are  synony- 
mous terms,  applicable  to  receipts,  either  from 
land  or  from  salaries ;  hence  whether  taxed  as  a 
land  tax  (which  assessment  is  determined  by  the 
income)  or  as  an  income  tax,  direct,  it  is  imma- 
terial to  the  party  paying  the  tax  as  well  as  to 
the  Government  on  receiving  it  for  revenue. 
To  illustrate :  Mr.  Agriculturalist  has  land  from 
which  he  receives  an  income  of  $1000,  the  prod- 
uct of  twenty  acres  which  are  assessed  at  $600 
per  acre,  a  total  of  $12,000  upon  which  he  pays 
taxes.  This  assessment  of  $12,000  represents  an 
income  which  pays  six  per  cent  interest  on  the 
investment,  together  with  the  labor  and  expense 
of  producing  and  marketing  the  crop.  The  in- 
come was  a  factor  which  determined  the  asses- 
sible  value  for  Mr.  Agriculturalist. 


Messrs.  Professional,  Broker,  Banker,  Me- 
chanic, Bookkeeper,  and  a  host  of  this  no-prop- 
erty-in-sight  class,  have  incomes  ranging  from 
$1000  upward  (I  noticed  one  insurance  pres- 
ident recently  drawing  a  salary  of  $100,000  a 
year),  whose  ability  to  do  is  their  non-assessible 
stock  in  trade,  from  which  these  incomes  are  de- 
rived. All  these  classes  are  as  dependent  upon 
the  Government  and  are  claiming  the  same  pro- 
tection as  the  land-owners.  The  army,  the  navy, 
the  post  office  service,  the  parcel  post,  the  public 
schools,  the  asylums,  hospitals,  alms  houses,  pen- 
itentiaries and  prisons,  as  well  as  the  entire  ju- 
dicial system  and  many  other  services  which  are 
indispensable  to  their  enjoyment  of  life,  liberty 
and  happiness  as  well  as  security  of  person, 
property  and  income  they  are  receiving,  while 
the  agriculuralists,  representing  but  six  per  cent 
of  the  population,  are  taxed  for  land,  tools  and 
every  necessary  in  producing  the  income,  all  im- 
provements produced  by  their  labor  and  upon 
the  products  of  this  land,  when  held  for  a  desir- 
able market  beyond  control  of  the  speculator. 
Upon  what  rule  of  reason,  righteousness  or  eq- 
uity is  this  system  of  taxation  based  ? 

How  THIS  SYSTEM  FAVORS  BANKS  AND 
BANKERS 


70 

How  this  system  favors  banks  and  bankers 
is  apparent  from  the  public  statement  of  a  city 
bank  advertising  its  resources. 

I         A    commercial    bank   organized 
less  than  50  years  ago 

Capital  actually  paid  up $  1,000.000.00 

Reserve  and  contingent  fund 1,757,149.57 

Employees'  pension  fund 158,261.32 

Assets   « $55,644,983.27 

The  above  statement  shows  the  active  re- 
sources which  produce  the  income  to  be  over 
$55,000,000,  while  the  assessible  capital  is  less 
than  $3,000,000.  The  Government  furnishes  a 
fifty-five  million  protection  for  a  three  million 
payment.  Who  pays  the  balance?  The  agricul- 
turalist, in  this  instance,  pays  on  all  the  acces- 
sories employed  to  produce  the  income,  the  bank 
pays  on  three  fifty-fifths  of  the  capital  and  ac- 
cessories employed  to  secure  its  income. 

This  $55,000,000  which  is  used  by  the  bank  in 
securing  its  income  is  under  Government  protec- 
tion, guarded  by  Government  police,  its  legal 
rights  guarded  by  the  Government's  judiciary 
and  the  income  therefrom  should  be  subject  to  a 
proportionate  share  of  the  expense  of  maintain- 


71 

ing  the  Government  whose  aid  it  invokes  and  en- 
joys, and  thereby  relieves  the  wealth-producing 
class  from  paying  the  proportionate  share  due 
from  the  bank,  and  especially  so  since  all  the 
wealth  which  has  been  so  successfully  manipu- 
lated by  the  banks  was  the  product  of  labor  and 
land. 

MANUFACTURING   AND    AGRICULTURAL    INDUS- 
TRIES COMPARED 

In  the  year  1909  the  agricultural  and  manu- 
facturing industries  each  produced  ov;er  eight 
billions  of  dollars  of  products  to  be  added  to  the 
wealth  of  the  nation.  The  assessable  capital  em- 
ployed by  the  agriculturalist  in  producing  this 
wealth  was  two  and  one-half  times  greater  than 
the  capital  required  by  the  manufacturers ;  hence 
the  taxes  of  the  agriculturalist  would  propor- 
tionally exceed  those  of  the  manufacturer  when 
based  on  capital  instead  of  income,  by  two  and 
one-half  times. 

The  eight  billion  dollars  of  wealth  contributed 
by  the  agriculturalist  was  created  from  land  and 
labor  with  no  draft  on  the  wealth  of  the  nation 
for  its  production.  The  eight  billion  dollars  con- 
tributed by  the  manufacturing  industries  was  se- 
by  drawing  on  the  national  wealth  for 


72 

twelve  billion  dollars  of  material  already  exist- 
ing, and  by  adding  labor  thereto  increased  its 
market  value  eight  billion  dollars  by  changing 
the  form  of  existing  matter  already  created. 
Under  these  conditions  the  agriculturalists  is  in 
the  position  of  the  man  who  both  dances  and  pays 
the  fiddler.  While  the  manufacturers  are  ac- 
credited with  the  eight  billion  dollars  for  labor 
bestowed  upon  materials  already  created,  the  ag- 
riculturalist not  only  brings  into  existence  the 
eight  billion  dollars  of  wealth  which  he  contrib- 
utes but  also  pays  two  and  one-half  times  the 
Government  tax  upon  his  industry  that  is  re- 
quired of  the  manufacturers. 

TAXATION  OF  PUBLIC  UTILITIES 

The  taxation  of  public  utilities  has  been  a 
fruitful  field  of  contention  between  the  taxpayers 
and  the  railroad  companies.  The  increased 
extension  has  been  phenomenal,  and  the  prop- 
erty liable  to  assessment  for  taxation  has  been 
unsatisfactory  to  the  taxpaying  public.  From  a 
mileage  of  229  miles  in  1832  it  extended  to  349,- 
992  in  1910,  with  a  capitalization  of  $18,417,- 
132,338 — a  sum  equal  to  64  per  cent  of  all  farms 
in  the  United  States,  or  52  per  cent  of  all  the 
farms  and  buildings,  or  50  per  cent  of  all  farms, 
buildings  and  farm  machinery,  and  implements 


73 

of  husbandry,  or  45  per  cent  of  all  farms,  build- 
ings, farm  machinery  and  implements  of  hus- 
bandry wjth  all  teams,  poultry  and  stock  of  all 
kinds  with  such  appurtenances  as  constitute  a 
complete  equipment  of  the  farm. 

The  railroad  employees  increased  from  1,017,- 
653  in  1900  to  1,699,420  in  1910,  and  increase  of 
sixty-six  and  nine-tenths  per  cent  in  ten  years, 
while  the  increase  of  the  agricultural  class  dur- 
ing this  period  was  only  ten  and  fifty-seven  hun- 
dredths  per  cent,  including  the  Chinese,  Japan- 
ese, colored  and  Hindu.  During  the  same  period 
the  manufacturing  employees  gained  thirty  per 
cent. 

Under  this  burden  of  supplying  products 
for  the  increased  population  and  revenues  for  the 
expanding  Government,  the  taxpayers  made  an 
effort  to  equalize  this  burden  of  taxation  through 
legislation,  and  in  pursuance  of  this  plan  a  Con- 
stitutional amendment  was  adopted  and  a  law 
separating  State  and  county  taxes  was  passed  by 
the  Legislature  of  the -State  of  California,  by 
which  law  the  taxation  of  public  utilities  was  to 
be  made  upon  a  revenue  basis,  in  lieu  of  the  tax 
upon  the  capital  invested.  The  rate  as  well  as 
the  amount  of  revenue  subject  to  taxation  was  to 
be  determined  by  a  State  Board  of  Commission- 


74 

ers,  appointed  by  the  Governor  of  the  State, 
transferring  the  assessment  of  the  property  and 
fixing  of  rates  from  the  assessor,  elected  by  the 
people,  to  a  commission  appointed  by  the  Gover- 
nor. Under  such  a  system  the  party  or  political 
machine  which  controls  the  offices  also  controls 
the  rates  of  taxation  for  public  utilities.  Taxa- 
tion of  public  utilities  like  our  public  lands  is  fast 
passing  out  of  the  control  of  the  peop!e,  upon 
whom  the  Government  depends  for  its  support. 

In  the  separation  of  State  and  county  taxes  a 
system  of  taxing  the  income  or  revenues  of  the 
railroads  (a  public  utility)  was  adopted  in  lieu  of 
a  tax  upon  the  property  employed  in  producing 
the  revenue.  This  plan  in  the  control  of  unprin- 
cipled men  might  prove  to  be  taxing  a  shadow  in 
place  of  the  substance  which  created  it.  The 
rate  of  taxation  as  well  as  the  amount  to  be  taxed 
is  practically  controlled  by  a  State  Board  of  Com- 
missioners appointed  by  the  Governor  of  the 
State. 

Two  distinct  systems  of  taxation  are  thereby 
created,  each  upon  a  distinctly  different  basis, 
one  for  the  industrial  class,  the  other  for  the  pub- 
lic utilities.  Under  the  limited  working  of  the 
new  law,  it  is  claimed  that  the  taxes  of  the  rail- 
roads have  been  increased  by  its  application,  but 


75 

to  what  extent  the  public  are  not  informed.  If, 
however,  it  fails  to  equalize  this  unequal  burden 
of  taxation  which  has  predominated  in  the  past, 
its  mission  will  be  fruitless  and  a  failure, 

The  present  tax  laws  which  distribute  the  bur- 
den of  taxation  so  unequally  and  so  unjustly  are 
a  relic  of  the  old  feudal  system,  which  has  from 
its  beginning-  to  the  present  time  been  the  vehicle 
employed  for  shifting  the  public  burdens  from 
the  privileged  class  to  be  carried  by  the  industrial 
and  working  classes,  and  through  the  manipula- 
tions of  those  who  control  legislation,  it  has  ac- 
complished that  which  the  autocrats  of  the  Old 
World  achieved  under  the  same  system,  the  sub- 
jugation of  the  masses. 

GROSS  INCOME  AND  XD  VALOREM  SYSTEMS 
COMPARED 

This  is  especially  true  in  California,  where  the 
per  capita  tax  is  almost  double  the  per  capita  tax 
of  the  average  of  the  forty-nine  States  which 
comprise  this  United  States. 

Another  startling  feature  of  this  dual  tax  law 
is  the  fact  that  it  furnishes  the  public  utility  and 
public  service  corporations  a  way  to  evade  their 
just  proportion  of  the  burden  of  taxation,  and  by 
force  of  law  compel  the  taxpaing  public  to  make 


76 

up  for  their  delinquencies  and  evasions  by  these 
enforced  contributions  which  we  call  taxes. 

This  gross  income  system  is  used  in  the  col- 
lection of  taxes  from  public  utility  and  public 
service  corporations,  railroads,  express  compan- 
ies, electric  light,  gas,  power  and  water  compan- 
ies banks,  loan  associations  and  insurance  com- 
panies, the  ad  valorem  system  is  used  for  collect- 
ing these  enforced  contributions  from  the  general 
public  who  are  not  included  in  this  favored  cap- 
italistic class. 

In  the  ad  valorem  system  the  rate  is  determ- 
ined by  an  official  chosen  by  the  people  for  this 
special  purpose,  while  in  the  gross  income  system 
the  rate  is  determined  by  a  Board  of  Commis- 
sioners appointed  by  the  Governor ;  the  assessor 
chosen  by  the  people  bases  his  assessment  upon 
the  value  of  the  property  assessed,  while  the 
board  appointed  by  the  Governor  bases  its  as- 
sessment of  public  utilities  and  public  service 
corporations  upon  the  gross  earnings  or  income 
as  reported  by  these  corporations ;  these  rates,  as 
established  by  this  board,  vary  from  1  to  4% 
cents  upon  the  incomes  of  the  different  corpora- 
tions. No  uniform  rate  is  applied  to  any  two 
classes.  Applying  this  same  method  to  a  general 
income  tax,  each  slass  would  have  its  special  rate 


77 

by  which  its  income  would  be  assessed  to  secure 
its  proportional  share  of  the  income  revenues. 
With  A's  income  assessed  at  a  1  cent  rate,  and 
B's  at  \y2,  C  at  a  2  cent  rate,  D  at  3y2  and  E  at 
4^4,  as  with  public  service  corporations  under 
the  present  system,  no  one  outside  of  the  public 
service  corporations  and  their  tax  experts  could 
be  persuaded  that  uniformity  of  rate  or  equitable 
distribution  of  the  burden  of  taxation  had  been 
secured  thereby. 

Under  present  tax  laws,  one  system  is  an  open 
assessment  by  the  elected  representative  of  the 
people  upon  a  visible,  tangible  property,  the  oth- 
er upon  a  shadow  which  is  influenced  largely  by 
the  administration  and  by  its  system  of  book- 
keeping, regardless  of  the  amount  of  property 
employed;  in  the  ad  valorem  system  the  failure 
of  income  brings  no  relief  from  the  burden  of 
taxation — the  "pound  of  flesh"  is  exacted  re- 
gardless of  its  consequence  to  the  unfortunate 
taxpayer;  in  the  gross  income  system  the  same 
condition  of  failure  brings  a  full  release  to  the 
unfortunate  public  service  corporation;  this 
feature  should  brand  the  dual  system  as  unjust, 
as  unequal  class  legislation  in  the  interest  of  the 
privileged  classes. 

An  investigation  of  the  results  attending  the 


78 

enforcement  of  this  dual  system,  will  furnish 
evidences  of  the  influence  of  privilege  in  the  cre- 
ation of  this  dual  system  for  taxing  the  public 
service  corporations  by  one  system  the  general 
public  by  another. 

To  inaugutrate  this  gross  income  system  it 
was  necessary  to  reduce  these  corporation  in- 
comes to  an  ad  valorem  basis,  and  in  doing  this, 
the  percentage  upon  the  gross  earnings  should 
produce  a  sum  equivalent  to  that  obtained  from 
the  general  public  who  are  assessed  upon  the  ad 
valorem  basis,  in  order  to  equalize  the  burden  of 
taxation  among  all  classes  of  taxpayers.  In  this 
case  it  is  assumed  that  the  average  rate  of  taxa- 
tion throughout  the  State  is  one  per  cent  on  $100 
valuation. 

The  average  State  rate  at  this  time,  as  re- 
ported by  this  Commission,  was  1.386  cents  on 
the  $100  valuation  of  property.  Upon  the  as- 
sumption, however,  of  a  one  cent  rate  as  a  basis, 
it  fixed  a  rate  of  4%  cents  to  be  assessed  upon 
the  gross  earnings  of  the  railroads,  and  other 
rates  varying  from  1  to  4^2  cents  for  car  com- 
panies, express  companies,  telegraph  and  tele- 
phone companies,  banks  and  insurance  compan- 
ies who  constitute  the  public  utility  and  public 
service  family,  who  are  separate  from  the  com- 


mon  herd  of  humanity,  like  sheep  from  the  goats 
in  the  corral  for  public  taxation. 

In  making  up  these  statements  for  the  intel- 
ligent public  the  foundation  will  be  based  upon 
facts  furnished  by  the  statistics  and  reports  of 
the  Departments  at  Washington,  in  order  to  avoid 
the  entangling  mystifications  which  might  arise 
when  relying  upon  the  statistics  and  memoranda 
furnished  by  the  expert  accountants  who  have  in 
the  past  so  adroitly  evaded  both  investigation  and 
publicity  of  its  methods.  Hence  property  values 
and  income  values  which  are  necessarily  em- 
ployed in  the  demonstration  of  these  two  sys- 
tems are  obtained  from  Government  sources  and 
are  untainted  by  corporation  jugglery. 

The  average  tax  rates  used  in  this  computa- 
tion were  taken  from  statements  issued  from  the 
Controller's  Department  of  the  State  of  Cali- 
fornia. 

An  examination  of  the  tax  lists  shows  the  av- 
erage tax  rate  in  this  State  to  be  1.664  cents  on 
the  $100  for  outside  property  and  2.1  cents  on 
the  $100  on  inside  property. 

Previous  to  this  dual  tax  law,  the  bulk  of  the 
railroad  property  (its  operative  property),  con- 
sisting of  buildings,  engines,  cars  and  other 


so 

equipments,  were  subject  to  the  payment  of  both 
a  municipal  and  State  tax,  since  the  operation  of 
this  law,  by  which  the  separation  of  State  and 
county  assessments  is  affected,  the  property  of 
the  railroad  is  no  longer  subject  to  municipal  as- 
sessments either  for  general  taxation,  special 
taxation  or  licenses  as  are  required  of  other  bus- 
iness interests. 

It  is  evident  from  these  existing  conditions 
that  the  public  utilities  and  public  service  com- 
panies gained  an  important  victory  over  the  tax- 
paying  public  when  at  the  last  legislature  they 
secured  a  two  years  postponement  in  the  righting 
of  this  existing  wrong,  which  is  being  perpetrat- 
ed upon  the  public. 

To  the  general  public  under  the  ad  valorem 
system  this  4%  rate  to  the  railroad,  4  cent  rate 
for  electric,  lighting,  gas  and  power  companies, 
3%  rate  for  telegraph  and  telephone  companies, 
2  cent  rate  for  express  companies, — where  the 
big  melon  dividends  are  so  often  reported, — a 
\]/2  cent  rate  for  insurance  companies,  and  a  1 
cent  rate  for  banks  and  loan  associations,  with 
such  results  as  have  followed  its  operation,  seem 
more  like  the  patch-work  of  a  public  utility  ex- 
pert, to  cover  the  evasions  and  shortcomings  of 
tax-dodging  corporations,  than  an  honest  effort 


81 

to  equalize  this  unequal  burden  of  taxation 
among  the  different  classes  of  taxpayers  of  this 
commonwealth. 

Another  significant  feature  of  this  tax  law 
which  adds  to  the  burden  of  the  ad  valorem  tax- 
payer is  the  exemption  of  the  operative  property 
of  these  privilegeoTcorporations  from  local  taxa- 
tion by  counties,  cities,  towns  and  districts,  there- 
by exempting  property  of  these  favored  compan- 
ies amounting  to  over  $400,000,000  from  local 
taxation  under  the  following  provision: 

"This  tax  shall  be  in  lieu  of  all  other  taxes  and  li- 
censes, State,  county  and  municipal,  except  on  coun- 
ty and  municipal  real  estate/' 

This  last  exception  relating  to  the  real  estate 
furnishes  no  relief,  however,  to  the  ad  valorem 
taxpayer,  since  the  amended  Constitution  pro- 
vides that  the  amount  paid  on  such  real  estate,  as 
county  or  municipal  taxes,  by  this  favored  class, 
shall  be  deducted  from  the  payments  assessed 
on  the  gross  incomes  of  these  public  utilities  and 
public  service  corporations." 

Another  significant  feature  of  this  expert  work 
in  separating  State  from  local  taxation  is  shown 
in  another  provision  which  shifts  the  responsibil- 
ity of  all  errors  and  miscalculations,  if  not  all 


82 

premeditated  inequalities,  upon  the  ad  valorem 
taxpayers. 

Having  provided  that  all  revenues  derived 
from  public  utility  and  public  service  corpora- 
tions shall  be  exclusively  for  State  and  school 
purposes,  and  having  been  authorized  to  estab- 
lish a  rate  upon  which  to  levy  an  assessment  for 
this  purpose,  it  is  provided  that  "A  general  ad 
valorem  tax  may  be  levied,  if  the  revenues  de- 
rived from  the  sources  mentioned  fail  to  meet 
the  requirements  of  the  State."  Under  these  two 
last  mentioned  laws  all  special  assessments  like 
the  $5,000,000  Panama-Pacific  Exposition  tax 
as  well  as  all  deficiencies  resulting  from  errors 
of  judgment  and  miscalculation,  either  intention- 
al or  unintentional,  fall  harmlessly  about  this 
privileged  class,  since  the  responsibility  therefor 
has  been  shifted  from  this  privileged  class  to  the 
ad  valorem  taxpayer,  who  must  pay  for  all  er- 
rors, mistakes  and  bad  judgment. 

With  such  glaring  inequalities  resulting  from 
the  application  of  this  new  system  of  taxation 
one  feels  justified  in  investigating  its  source,  the 
agencies  through  which  it  has  come  as  well  as 
the  underlying  principal  upon  which  it  is  based, 
or  assumed,  for  a  law  without  a  basic  principal 
is  as  a  shadow  without  substance,  or  a  dream  of 


83 

an  imaginative  theorist,  to  be  forced  upon  the 
people  under  the  form  of  a  law — a  practical  dem- 
onstration of  the  danger  and  folly  of  this  central- 
ization of  power  whereby  the  control  of  public 
affairs  passes  from  the  people  to  the  privileged 
classes  who  fill  the  public  offices  with  their  chos- 
en tools. 

In  the  fixing  of  these  rates  the  State  Board  of 
Equalization,  by  discarding  property  valuations 
which  were  tangible  as  its  basis,  built  upon  a  the- 
ory that  the  rates  assessed  on  gross  income 
would  be  substantially  equivalent  to  the  rates  of 
taxation  paid  by  other  property  owners  assessed 
under  the  ad  valorem  system. 

To  carry  out  this  plan  it  became  necessary  to 
reduce  the  corporation  gross  income  tax  to  an  ad 
valorem  basis,  and  in  doing  this  it  arbitrarily 
adopted  the  ratio  on  gross  receipts  at  one  per  cent 
on  $100  value  of  the  property. 

The  average  State  rate  for  assessing  property 
at  this  time  was  1.1386  per  $100  of  actual  value, 
and  when  assessed  at  less  than  its  actual  value, 
this  rate  would  be  proportionately  increased;  if 
assessed  at  60  per  cent  of  its  actual  value,  as  is 
the  general  custom,  the  average  tax  rate  would 
be  proportionally  increased.  How  the  tax  ex- 


84 

perts  arrived  at  their  one  per  cent  basis  is  a  secret 
which  the  general  public  is  not  supposed  to  un- 
derstand while  paying  this  unequal  burden  of 
taxation  resulting  therefrom. 

In  seeking  a  uniform  basis  upon  which  to  levy 
a  tax  which  shall  be  equitable  to  all  classes,  it 
must  be  uniform  in  rate  as  well  as  applicable  to 
all  classes,  not  a  discriminating  rate  on  one  class 
of  property  or  one  class  of  taxpayers  and  anoth- 
er rate  upon  another  class  of  property  owned  or 
controlled  by  still  another  class  of  the  common- 
wealth ;  it  should  be  uniform  and  definite,  with 
no  special  preferences  smuggled  in  for  the  ben- 
efit of  any  privileged  individual  or  class,  and  in 
doing  this,  land  values  can  be  more  easily  and 
definitely  reduced  to  a  revenue  basis  than  the 
gross  earnings  of  a  public  corporation  can  be  re- 
duced to  a  property  basis,  and  will  be  far  more 
easily  understood  by  the  taxpaying  public. 

By  the  application  of  the  very  principal  an- 
nounced by  this  State  Board  of  Equalization 
"that  the  net  earnings  determine  the  value  of  the 
property''  then  the  revenue,  income  or  earnings, 
by  whatever  name  it  is  called,  furnishes  the  bas- 
is for  land  assessment,  and  the  assessor  levying 
the  tax  must  recognize  that  all  incomes,  from 
every  source,  are  subject  to  assessment,  with  no 


85 

discriminating  features  based  upon  the  fine-spun 
theories  of  public  service  experts.  All  individ- 
uals who  are  compelled  to  respond  to  this  "en- 
forced contribution"  for  supplying  the  Govern- 
ment revenues  should  be  on  a  uniform  basis, 
where  the  humblest  taxpayer  is  on  an  equality 
with  the  privileged  public  service  corporations. 
Under  the  present  system  the  per  capita  tax  in 
California  for  1913  was  $7.41,  as  against  an  av- 
erage of  $3.80  for  forty-nine  States  of  this  Union. 

Ohio,  Indiana  and  Illinois,  representing 

Middle  West,  average 2.59 

Iowa,  Minnesota,  Nebraska  and  Kansas 2.65 

West  Virginia,  No.  and  So.  Carolina  and 

Georgia _ 1 .76 

Oklahoma   : 1 .89 

Texas   „ 2.97 

These  statistics  show  the  extravagance  of  our 
California  legislators  in  this  matter  of  taxation 
of  the  people,  when  compared  with  other  States 
of  the  Union,  where  next  to  Nevada,  California 
apparently  leads  as  the  worst  tax-ridden  State  in 
the  Union. 

If  this  excessive  burden  of  taxation  must  be 
carried,  then  let  it  be  equally!  shared  by  the  priv- 


86 

ileged  public  service  corporations  and  by  the  gen- 
eral public,  and  when  the  confusing  theories  of  a 
paid  expert  result  in  developing  a  system  which 
exempts  special  classes  from  assuming  their  eq- 
uitable share  of  these  enforred  contributions 
which  are  thereby  added  to  the  burdens  of  the 
other  classes  by  force  of  law,  is  a  rank  injustice 
to  the  taxpaing  classes.  In  this  way  the  present 
system  of  collecting  these  enforced  contributions 
for  the  support  of  the  Government  is  a  practical 
hold-up  of  the  taxpaying  public  by  the  public  util- 
ity and  public  service  corporations, 

A  variable  and  irrational  system  for  enforc- 
ing these  collections  is  an  open  door  to  inequal- 
ities and  favoritism  which  necessarily  create  sus- 
picion and  distrust  of  public  officials  in  the  dis- 
picion  and  distrust  of  public  officers  in  the  dis- 
charge of  their  official  duties,  and  this  condition 
is  used  as  a  justification  for  the  evasions  prac- 
tised in  making  up  the  assessment  roll,  which 
evasions  are  prompted  by  a  false  reasoning  that 
a  disproportionate,  compulsory  contribution  for 
public  expenses,  exacted  by  force  of  an  unjust 
law,  justifies  such  evasions  in  self  defense,  there- 
by transforming  the  willing  taxpayer  into  the 
artful  tax-dodger,  reasoning  that  both  the  Lord 
and  the  law  help  only  those  who  help  themselves, 


consequently   the   end   justifies   the   means   em- 
ployed. 

Under  such  conditions  the  double  per  capita 
tax  rate  of  the  ad  valorem  taxpayers  of  Califor- 
nia—those who  pay  taxes — is  readily  accounted 
for,  and  since  these  conditions  will  continue  to 
exist  as  long  as  the  creative  cause  remains,  the 
remedy  lies  only  in  the  adoption  of  a  definite  and 
uniform  basis  of  taxation  for  equalizing  these 
various  enforced  contributions  among  the  sev- 
eral contributors,  and  in  this,  either  system  is 
preferable  to  a  dual  system  which  incites  jeal- 
ousy on  the  one1  hand  and  offers  a  reward  to  de- 
signing manipulators  of  large  interests  on  the 
other  hand  in  its  desire  to  shift  its  burden  upon 
others. 

In  this  complex  system  now  in  force  for  col- 
lecting Government  revenues  the  majority  of  the 
should-be-taxpayers,  who  ought  to  share  in  these 
contributions  for  Government  revenue,  are  omit- 
ted, and  this  omission  proportionally  increases 
the  per  capita  tax  of  such  as  are  embraced  under 
the  law. 

INCREASING  THE  ASSESSMENT  ROLL 

To  secure  this  result  a  system  should  be  adopt- 
ed which  would  embrace  all  who  should  contrib- 


ute  to  the  support  of  the  Government,  ail  ol  law- 
lawful  age  who  are  under  Government  protec- 
tion and  enjoying  the  benefits  resulting  from  the 
Government,  each  contributing  his  or  her  pro- 
portionate share.  A  suggestion  upon  this  plan 
will  follow  later. 

Next  in  importance  to  the  plan  for  the  equit- 
able adjustment  of  these  contributions  from  the 
various  contributors  is  the  faithful  co-operation 
of  the  officials  charged  with  the  collection  of 
these  enforced  contributions,  and  to  whom  much 
of  this  inequality  may  be  traced  at  the  present 
time,  either  by  indifference  to  duty  or  by  under- 
valuations in  the  primary  assessment  of  property. 
In  California,  the  custom  of  assessments  at  60 
per  cent  has  superseded  the  law,  which  declares 
that  assessments  must  be  the  actual  value  of  the 
property  assessed.  With  the  law  once  set  aside 
for  general  assessments,  then  under-valuations 
where  personal  obligations  or  favoritism  exists 
would  naturally  follow  through  the  same  disre- 
gard of  law ;  hence  law  without  efficient  enforce- 
ment is  as  useless  and  valueless  as  the  executive 
official  would  be  without  any  law  to  enforce. 
Both  are  equally  important;  therefore  consider- 
ation will  be  given  to  each. 


UNIFORMITY  IN  ASSESSMENT  OF  ALL  CLASES 

Since  the  Government  is  that  form  of  funda- 
mental rules  and  principles  by  which  each  indi- 
vidual member  of  the  body  politic  are  to  regulate 
their  social  action,  it  naturally  follows  that  such 
individual  members  must  also  share  in  the  bur- 
dens and  responsibilities  as  well  as  in  the  benefits 
resulting  therefrom,  and  as  all  classes  are  equally 
dependent,  so  each  class  should  assume  its  pro- 
portianate  share  in  its  maintainance ;  laborers, 
mechanics,  manufacturers,  professional  men, 
bankers,  brokers,  and  salaried  men  of  all  classes 
who  enjoy  the  benefits  resulting  from  Govern- 
ment, should  contribute  to  the  maintenance  of 
that  Government  in  proportion  to  their  respect- 
ive interests  or  incomes. 

While  primarily  land  Avas  the  principal  re- 
source for  Government  revenues,  the  passing  out 
of  the  many  small  holdings  by  land  owners  who 
worked  their  own  lands,  which  were  later  merged 
into  large  holdings  and  were  farmed  by  land  bar- 
ons upon  a  commercial  basis,  together  with  the 
industrial  change  from  an  agricultural  to  prac- 
tically a  manufacturing  nation,  with  its  added 
army  of  salaried  employees,  have  so  materially 
changed  the  primary  conditions  that  the  changed 
conditions  demand  a  re-adjustment  to  conform 


90 

to  modern  environments. 

Since  the  owners  of  the  cultivated  lands  in  the 
United  States  according  to  the  U.  S.  census  re- 
ports of  1912  were  less  than  six  per  cent  of  the 
population,  the  assessment  of  land  owners  em- 
braces a  small  per  cent  of  the  population  even 
when  the  speculating  land  owners  are  included, 
while  the  main  body  of  the  population,  those  re- 
ceiving incomes,  earnings  or  salaries  which  com- 
pare favorably  with  the  returns  of  the  land  own- 
er, having  little  or  no  visible  property,  not  ex- 
empt from  taxation,  escape  the  assessment  levied 
for  the  support  of  the  school  which  educates  their 
children,  the  courts  to  which  they  look  for  the 
protection  of  their  personal  rights  and  all  other 
benefits  derived  from  the  various  branches  of  the 
Government. 

To  equalize  this  burden  of  enforced  contribu- 
tions to  support  the  Government,  it  must  neces- 
sari!y  be  extended  to  all  classes  benefited  by  its 
various  branches,  educational,  judicial,  commer- 
cial or  industrial,  hence  a  tax  levied  upon  in- 
comes, revenues  or  earnings,  whether  obtained  by 
the  labor  of  the  agriculturalist  from  the  land  or 
by  the  hand  of  the  mechanic  in  the  shop,  or  the 
salesman  behind  the  counter  or  the  bookkeeper 
at  the  desk,  or  the  professional  man  by  the  effort 


of  the  brain,  or  the  Government  official  from  his 
salary,  all  represent  incomes,  which  when  acquir- 
ed- carry  no  ear-marks  to  distinguish  either  the 
source  or  means  employed  in  securing  the  same, 
or  to  direct  its  future  use  for  its  possessor,  it  ful- 
fills the  same  purpose  to  each  of  its  possessors, 
ministering  to  ones  needs  and  wants  and  neces- 
sities, from  the  humblest  laborer  to  the  highest 
official,  and  are  equally  under  the  protecting 
care  of  the  Government,  which  is  an  equal  neces- 
sity to  its  enjoyment  by  all,  then  why  should  not 
each  contribute  his  or  her  individual  share  for  the 
maintainance  of  the  Government  which  extends 
its  benefits  to  all? 

INCOME  BASE  FOR  LAND  VALUES 

The  artificial  distinction  which  has  been  recog- 
nized between  lands  and  incomes  derived  from 
other  sources  has  coused  an  unnecessary  and  un- 
warranted discrimination  which  has  complicated 
the  tax  problem  and  mystified  the  law-makers, 
and  in  this  fog  of  complication  and  mystification, 
the  privileged  classes  have  eluded  equity  and  es- 
caped their  proportionate  share  of  taxation  by  the 
injection  of  a  special  system  of  assessment  in 
California  and  by  a  system  of  under  valuation  ev- 
erywhere, both  these  plans  are  a  subterfuge  for 
securing  special  rates  for  special  classes. 


92 

The  proceeds  of  labor  and  land,  as  well  as  the 
proceeds  of  labor  in  the  shop  is  income  to  the 
producer;  the  compensation  'of  the  artisan  as 
well  as  the  fee  of  the  professional  man  for  the 
effort  of  the  brain  is  income;  the  salary  of  the 
office  man  or  Government  official  is  income,  and 
each  and  all  these  incomes  when  once  acquired 
carry  no  ear-marks  to  distinguish  the  source 
from  which  they  were  derived,  nor  the  instrumen- 
tality employed  in  its  acquirement,  all  are  on  one 
common  level,  and  all  are  directed  to  one  common 
end,  namely,  to  supply  its  possessor  with  the 
necessary  means  of  existance  and  comforts,  as 
well  as  the  luxuries  of  life  and  in  the  enjoyment 
of  this  each  individual  is  entitled  to  equal  privi- 
leges in  every  public  institution  maintained  by 
the  Government. 

Equal  participation  in"  the  benefits  conferred 
by  the  Government,  demand  an  equal  participa- 
tion in  the  support  of  that  same  Government. 

On  what  principal  of  justice  should  a  small 
minority  of  land-owners  carry  the  burden  of  this 
large  majority  who  enjoy  equal  favors  from 
the  Government? 

The  establishment  of  a  uniform  and  equitable 
system  of  taxation  could  be  accomplished  by  as- 


93 

sessing  lands  upon  the  basis  of  the  income  or 
revenue  in  the  same  manner  as  the  State  Board 
secured  its  valuation  of  the  public  service  cor- 
poration property,  determining  its  value  by  the 
earnings  therefrom,  and  this  with  a  correspond- 
ing income-tax  applied  to  all  other  classes,  wheth- 
er obtained  from  the  land,  the  shop  or  the  office,  is 
immaterial,  and  the  principle  of  equity  in  the  dis- 
tribution of  this  burden  among  all  the  benefici- 
aries is  a  sound  basis  to  build  upon,  the  details  to 
be  worked  out  to  conform  to  whatever  condi- 
tions may  arise  in  its  application. 

In  making  this  assessment  upon  land,  no  dis- 
tinction should  be  made  between  producing  and 
non-producing  agricultural  lands,  the  assessment 
being  based  upon  the  average  income  of  produc- 
ing lands  of  this  class  in  the  neighborood,  and 
thereby  compell  the  speculating  owners  of  the 
741,832,058  acres  of  uncultivated  lands,  being 
held  for  higher  prices  to  be  created  by  com- 
munity labor,  to  contribute  their  share  for  sup- 
porting the  Government  as  well  as  for  the  in- 
crease of  the  value  of  their  own  lands,  lying  in 
unproductive  idleness. 

With  an  equable  tax  upon  this  741,832,058 
acres  of  non-producng  land  to  share  this  burden 
of  taxation  equally  with  the  owners  of  the  487,- 


94 

451  acres  of  cultivated  lands,  together  with  the 
taxable  incomes  from  all  other  income  classes, 
then  the  land  owners  who  work  their  own  lands 
would  have  more  inducement  to  live  and  labor 
for  themselves,  their  families  and  the  community, 
and  when  these  artificial  environments  which  cre- 
ate such  unequal  burdens  are  swept  away,  and 
every  class  bears  its  proportionate  share  of  the 
public  burden,  then  "tariff  for  revenues''  with 
privelege,  its  sponsor,  will  disappear  as  a  worn- 
out  relict  of  ancient  feudalism. 

In  this  assessment  of  lands  upon  an  income 
basis,  a  classification  would  be  necessary  as  ag- 
ricultural, mining,  oil  lands  and  building  sites, 
would  be  assessed  according  to  the  rules  regu- 
lating the  values  of  each  class  in  the  commercial 
market.  > 

This  income  tax  upon  lands  should  be  in  lieu 
of  all  other  taxes  for  the  improvements,  or  op- 
erating property  used  in  producing  the  income 
therefrom. 

PLANS  SUGGESTED  FOR  TAXATION 

Under  the  present  system  of  taxation,  the 
amount  as  well  as  the  source  from  which  the  rev- 
enues are  derived,  depends  largely  upon  the  offi- 
cial leveying  the  assessment,  a  demonstration  of 


95 

which  was  furnished  by  one  of  the  middle  states, 
where  a  three  million  dollar  assessment  was  made 
upon  a  ten  million  dollar  property,  as  hereinafter 
described. 

A  petition  to  increase  the  assessment  to  sixty 
per  cent  of  its  true  value,  as  required  by  law  re- 
fused by  the  State  Auditing  Board,  an  appeal  to 
the  State  Board  of  Equalization  of  which  the 
Governor  was  ex-officio  a  member,  was  also  re- 
jected, and  a  subsequent  appeal  to  the  Supreme 
Court  of  the  State,  where  it  was  followed  by  the 
railroad  lobby  opposing  every  effort,  also  met 
with  failure  and  the  assessment  upon  a  ten 
million  dollar  property  was  maintained  at  a  three 
million  dollar  assessment  by  the  assessor.  This 
illustrates  conditions  existing  in  every  state,  and 
when  the  power  of  the  people  is  vested  in  a  single 
person,  who  is  beyond  the  immediate  control  of 
the  people,  then  privilege  exercises  its  power 
without  restraint. 

Nothing  is  so  effective  for  securing  the  fidelity 
of  an  official  as  to  make  him  personally  responsi- 
ble for  his  official  acts  in  a  pecuniary  as  well  as 
a  moral  sence  and  this  is  especially  desirable  in 
the  administration  of  the  tax  assessor's  office,  in 
which  employment  he  deals  with  men  whose  con- 
science regarding  taxation  is  more  pliable  and 
elastic  than  in  the  ordinary  business  transactions 


96 

of  the  day,  hence  it  requires  more  stringent  safe- 
guards to  maintain  a  faithful  and  unbiased  ad- 
ministration than  in  private  life,  and  especially 
when  subjected  to  the  obligations  and  demands 
of  privilege  who  placed  them  in  office. 

To  aid  in  accomplishing  this,  there  might  be 
added  to  the  law  requiring  an  assessment  at  the 
true  value,  an  additional  provision  which  would 
confiscate  by  the  State,  that  portion  of  the  owners 
property  which  was  in  excess  of  his  sworn  state- 
ment to  the  assessor,  as  well  as  all  unreported 
property,  all  of  which  would  escheat  to  the  State 
the  same  as  the  estate  of  a  decedent  who  leaves 
an  estate  without  heirs  to  inherit.  » 

To  this  add  the  further  provision,  making  the 
assessor  and  his  bondsmen  liable  for  the  differ- 
ence between  the  assessed  and  the  true  value  less 
a  ten  per  cent  margin. 

How  To  DETERMINE  THE  TRUE  VALUE 

Since  the  courts  are  the  power  utilized  by  priv- 
ilege to  delay,  if  not  to  defeat  justice,  where  val- 
ues might  be  in  dispute,  let  three,  men  selected 
from  the  neighborhood  be  chosen,  one  by  the 
property  owner,  another  by  the  state,  and  these 
two  to  select  the  third,  who  will  constitute  a 
board  of  arbitration  to  determine  the  value  of 


97 

the  assessable  property,  a  majority  vote  from 
which  no  appeal  can  be  taken,  to  be  accepted 
by  both  parties  as  the  true  value  at  which  it  is  to 
be  assessed,  thus  avoiding  the  long  and  expens- 
ive subterfuges  resorted  to  by  ingenious  and  art- 
ful tax-dodgers  and  corporations. 

The  advantage  of  a  new  arbitration  board 
for  each  case  would  be  two-fold:  first,  referees 
thus  selected  would  be  more  familiar  with  local 
values  than  a  court  at  a  distance;  second,  where 
privilege  would  interfere Jt  encounters  three  new 
subjects  in  every  case,  where  under  ordinary 
judicial  systems  its  lobbying  influence  is  concen- 
trated in  one  spot  for  all  cases  which  may  arise 
in  the  judicial  district.  In  other  words  organized 
forces  are  more  efficient  when  concentrated  than 
when  scattered. 

While  these  suggestions  are  not  intended  as 
specific,  yet  something  along  these  lines  would 
not  only  secure  a  fuller  treasury  but  would  es- 
tablish a  more  equitable  division  of  the  burden  of 
taxation,  while  safeguarding  the  interests  of  the 
people  as  well  as  furnish  a  protection  to  the  as- 
sessor from  the  insidious  and  powerful  influences 
of  privilege  and  its  lobby.  » 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 

AN  INITIAL  FINE  OF  25  CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $1.OO  ON  THE  SEVENTH  DAY 
OVERDUE. 


APR  12  1947 


12575 


THE  UNIVERSITY  OF  CALIFORNIA  LIBRARY 


